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How To Invest Like Harvard & Yale

Posted By Jim On 10/22/2008 @ 12:19 pm In Investing | 7 Comments

I’ve had asset allocation on the brain lately (it’s hard not to with all this volatility), it doesn’t hurt that the stock market has seen some tectonic shifts these last few weeks, and so I turned to an article published earlier this year looking at the asset allocations of college endowments. Specifically, this article looked at Harvard’s exceptional 15% return per annum over the last ten years and Yale’s mind-blowing 17.2% return over that same time period. While I’d be curious to know how they’re doing nowadays, the fact remains that their returns are still laudable and worth investigating.

Harvard & Yale Asset Allocations

The chart above was pulled from the article and it shows a very simplified view of a very sophisticated portfolio. The first thing that probably jumps out at you is the fact that, in both portfolios, there’s only a mere 12% held in domestic equities – that’s the stock market. Chances are you have more than 12% in equities.

Another significant factoid from that chart is that the largest holding they have is in real assets such as real estate and commodities. Again, chances are you don’t have much invested in real assets (unless you count your house, which is less an investment decision as it was a living decision).

Finally, both have a huge piece in private equity (like hedge funds) and absolute return (assets that are supposed to yield a return in good and bad markets).

How Can You Do This?

This one is again from Smart Money and it shows how you can replicate the holdings (or at least get as close as possible) of Harvard and Yale through various funds. Want some absolute growth? PIck up some Hussman Strategic Growth (HSGFX [3]). Want a taste of private equity? PowerShares Private Equity ETF (PSP [4]) will get you into that game.

Worth a shot right? Or go with something simpler like a lazy portfolio [5].

A League of Their Own [6] [Smart Money]


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[2] Email: mailto:?subject=http://www.bargaineering.com/articles/how-to-invest-like-harvard-yale.html

[3] HSGFX: http://finance.google.com/finance?q=HSGFX

[4] PSP: http://finance.google.com/finance?q=PSP

[5] lazy portfolio: http://www.bargaineering.com/articles/introduction-to-lazy-portfolios.html

[6] A League of Their Own: http://www.smartmoney.com/smartmoney-magazine/index.cfm?story=september2007-league

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