Wednesday, August 2, 2017

Shifting Towards Carnegie

In broad terms, if you invest in lots of things that represent the overall market, you will tend to get the average return. If you want to deviate from the average, you have to concentrate your bets. (Of course, a bad guess will cause you to deviate below the average; that's the risk.) On the spectrum between the Buffett quote above and the Carnegie quote, UC seems to be moving towards the Carnegie approach: (from Bloomberg)

The University of California’s decision to cut back on outside money managers is paying off. The state system, which oversees more than $110 billion of assets, slashed about 100 funds in three years to reduce fees and better concentrate its bets, according to Chief Investment Officer Jagdeep Bachher. The strategy is working, with the pension and endowment gaining almost 14 percent in 11 months though May after losing money in fiscal 2016, he said...

The university expects to invest more in alternative assets while trimming its exposure to equities, according to a presentation prepared for a July 11 board meeting. The chief investment office boosted its target for hedge fund allocation to 25 percent of the endowment, up from 18 percent, and plans to double its private equity bets to 22.5 percent...

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