Core Concepts

Endowment Model For All

Make “The Endowment Model” Work For All

In recent years, the “endowment model” of investing has been seen as the “gold standard” of institutional investment practice. In practice, few institutional allocators have the resources and access required to invest in the same way as the largest university endowments. Moreover, in recent years, the investment returns that the leading endowments have achieved are not higher than outcomes available from much simpler, liquid and transparent portfolios, leading some to question whether the ongoing surge of assets toward this investment style is impairing its potency. At Atlas, we believe we can generate returns competitive to endowment model outcomes with a much more cost-effective, liquid and understandable investment strategy.

The “endowment model” philosophy boils down to two primary characteristics:

  • Heavy reliance on two return sources: equity beta and illiquidity
  • Strong focus on external manager access and selection

Markets and the Economy

A More Flexible and Attainable Model

Success of early adopters such as Yale has generated many copycats! Yale University has earned an enviable annual return of 13%+ since 1985. In contrast, the average/median institutions’ return is lower than the outcomes of simple stock/bond index portfolios. Perhaps the “Yale” model is not easy to replicate after all? Based on our own decades of experience with the “endowment model”, we believe it is the right time to consider:

  • Moving towards low-cost liquid implementations of investment risks
  • Improve outcomes through systematic approaches to asset allocation, utilizing value, momentum and economic cycle information

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