From an online/emailed book review in the Journal of Economic Literature of Mission and Margin: A Practical Guide to University Finances:
In the last 40 years many universities have followed the lead of Yale University under its legendary chief investment officer David Swensen and have tried to increase expected returns through judicious risk taking in multiple asset classes. A riskier asset allocation delivers a higher expected return and hence a higher sustainable spending rate, but it worsens the university’s risk management problem. The trade-off should be transparent but can be obscured when universities invest in illiquid assets, such as real estate and private equity, whose valuations are only gradually adjusted to reflect market conditions.
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Note: Our recent coverage of the Regents' Investments Committee which met on Sept. 14 pointed to the large chunk of illiquid assets in the portfolio.
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