Do university endowments invest for the long term, a strategy they should follow given that they invest for future generations?
A new study published in the Financial Analysts Journal examined the behavior of a dozen rich U.S. endowments since 1945, and drew comparisons with earlier periods to find out.
The research showed that during the run-up to a crisis, the 12 endowments typically decreased their active risky allocations, defined as equities and alternative assets. After the onset of a crisis, they increased these allocations as prices for risky assets fell.
“Thus, the evidence suggests that endowments do, indeed, behave as long-term investors by tending to invest countercyclically,” the study concluded.
The study’s sample comprised the eight Ivy League schools — Brown, Columbia, Cornell, Dartmouth, Harvard, Princeton, University of Pennsylvania and Yale — as well as four universities that ranked in the top 20 in doctorate production in the early 1920s — Johns Hopkins, Massachusetts Institute of Technology, Stanford and the University of Chicago.