Criticism of The Endowment Model
After Harvard’s endowment dropped a record 30% to $26 billion in the year ended June 2009, an 81 page report released in May 2010 found that "The endowment model of investing is broken. Whatever long-term gains it may have produced for colleges and universities in the past must now be weighed more fully against its costs — to campuses, to communities and to the wider financial system that has come under such severe stress.”
In a video interview, Mark W. Yusko founder of Morgan Creek Capital Management, LLC one of the veterans of the endowment investment model, claims that one year where endowments did not outperform but rather "tie everybody else" does not break the endowment model. The endowment model is still the most viable proposition for long-term investors. Investors would also realize that mark-to-market reporting has a bigger impact on reported performance than before.
Read more about this topic: David F. Swensen
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