Behavioral Asset Allocation for Foundations and Endowments

Posted: 29 Jun 2006

See all articles by William W. Jennings

William W. Jennings

U.S. Air Force Academy - Department of Management

Steve P. Fraser

Florida Gulf Coast University

Date Written: June 2006

Abstract

The behavioral asset allocation framework developed for individual investors can help foundation and endowment trustees become more comfortable with "uncomfortable" asset classes that would help overall portfolio efficiency. Eleemosynary investment, particularly at smaller charities, is typified by convention and conservatism. The behavioral asset allocation approach helps overcome this tendency by decomposing the total portfolio into timeline-based subportfolios that look to secure the nonprofit's payouts for many years and isolates the "uncomfortable" assets in the longest-term subportfolios. We advance and apply the behavioral asset allocation framework in a new context, yet one relevant for high-net-worth individuals with charitable intent.

Keywords: behavioral finance, portfolio choice, asset allocation, nonprofit, endowment, foundation, mean-variance optimization

JEL Classification: G11, G23, L30

Suggested Citation

Jennings, William W. and Fraser, Steve P., Behavioral Asset Allocation for Foundations and Endowments (June 2006). Available at SSRN: https://ssrn.com/abstract=911626 or http://dx.doi.org/10.2139/ssrn.911626

William W. Jennings (Contact Author)

U.S. Air Force Academy - Department of Management ( email )

2354 Fairchild Drive
Suite 6H-94
Academy, CO 80840-2944
United States

Steve P. Fraser

Florida Gulf Coast University ( email )

10485 FGCU Blvd S
Ft. Myers, FL 33965-6565
United States

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