A 19 basis point portfolio beats the average of most college endowments
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A 19 basis point portfolio beats the average of most college endowments
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Re: A 19 basis point portfolio beats the average of most college endowments
#2Be wary of reading this as "if endowments fired their managers and invested in Vamguard funds, they'd on average boost their returns". Perhaps true of the smaller, consistently-underperforming ones. But at the endowment side, a lot of planning goes into avoiding your size being felt by the markets.
Re: A 19 basis point portfolio beats the average of most college endowments
#3This would be more interesting if he had proposed the portfolio 10 years ago, rather than to do so in retrospect.
Re: A 19 basis point portfolio beats the average of most college endowments
#4That only beats half of the endowments, I'd be more impressed if it be something like 75% to indicate it was truly a top tier product instead of just better than average.
Re: A 19 basis point portfolio beats the average of most college endowments
#5This would be more interesting if he had proposed the portfolio 10 years ago, rather than to do so in retrospect.
Warren Buffet made a similar bet 8 years ago on a 10 year horizon, betting on Vanguard against some top hedge funds.
Buffett is very likely to win that bet.
http://fortune.com/2015/02/03/berkshires-buffett-adds-to-his...
Re: A 19 basis point portfolio beats the average of most college endowments
#6This would be more interesting if he had proposed the portfolio 10 years ago, rather than to do so in retrospect.
That's a great point, however his comparison is actually the "standard" 60/40 index fund split, which means he's not retroactively picking a winning mix - he's comparing them to the control group, so to speak.
Re: A 19 basis point portfolio beats the average of most college endowments
#7Be wary of reading this as "if endowments fired their managers and invested in Vamguard funds, they'd on average boost their returns". Perhaps true of the smaller, consistently-underperforming ones. But at the endowment side, a lot of planning goes into avoiding your size being felt by the markets.
What planning are the endowments able to do that Vanguard would not also be doing?
Re: A 19 basis point portfolio beats the average of most college endowments
#8Be wary of reading this as "if endowments fired their managers and invested in Vamguard funds, they'd on average boost their returns". Perhaps true of the smaller, consistently-underperforming ones. But at the endowment side, a lot of planning goes into avoiding your size being felt by the markets.
That's a fair point. Suppose all the underperforming endowments switched to this strategy. All of that money would certainly lower returns.
Re: A 19 basis point portfolio beats the average of most college endowments
#9Be wary of reading this as "if endowments fired their managers and invested in Vamguard funds, they'd on average boost their returns". Perhaps true of the smaller, consistently-underperforming ones. But at the endowment side, a lot of planning goes into avoiding your size being felt by the markets.
What planning are the endowments able to do that Vanguard would not also be doing?
Anything. Vanguard index funds just track the market so there's no hedging.
The main planning I could see overlap is executing large trades since they're both moving massive amounts of money.
Re: A 19 basis point portfolio beats the average of most college endowments
#10This would be more interesting if he had proposed the portfolio 10 years ago, rather than to do so in retrospect.
Proponents of index funds have been proposing exactly this sort of portfolio for about 40 years. (Well, okay, 40 years ago was the origin of the first index fund, Vanguard's S&P 500 tracker; a portfolio amalgamating three market segments like this would only have become possible somewhat later.) The specific 60/40 stock/bond mix here (with moderate international exposure) is solidly in the "bog standard investment advice" category, too: I wouldn't be surprised if it's what most people would choose if they wanted to avoid accusations of post hoc selection bias. (In fact, that's my only point of concern with the choice: it's a distribution that I associate more with mildly cautious middle aged families than with major institutions. But I think that's the point.)
I think that just about any indexing fan would be perfectly content to say, "Yeah, please feel free to track this mix into the future, too." It's one size fits all investment advice, but again, that's pretty close to what index funds are all about.