Practical Applications of A Better Approach to Systematic Outperformance? 58 Years of Endowment Performance

Abstract

A Better Approach to Systematic Outperformance? 58 Years of Endowment Performance, published in the Summer 2020 issue of The Journal of Investing, shows that the average endowment has failed to outperform the traditional passive 60/40 benchmark for the past six decades. Indeed, the average endowment also has failed to reach its annual spending needs and long-term investment goals during the same period. Surely, suggests author Dennis Hammond of Veriti Management, there must be a better way.

In what he calls the “triumph of hope over experience” among endowments and their consultants, agency issues, overconfidence, and complacency have kept endowments doing the same thing and expecting better results, Hammond says. But by creating a unique dataset of endowment returns over the longest period ever examined, he was able to measure how well endowments have performed relative to their prime directive over time. His findings provide empirical evidence for trustees and CIOs who may want to rethink their approach to endowment performance.

TOPICS: Foundations & endowments, wealth management