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We examined the behavior of US university endowments since 1945: their big strategic moves into equities and alternatives; how they invest at the time of crises; and the extent to which they exploit their long-horizon advantage.


Overview

University endowments invest for future generations, so their strategy should reflect their long horizon. We researched whether they really do behave like long-term investors. We examined the behavior of US endowments since 1945 and drew comparisons with earlier periods. Using a long-run dataset on 12 major universities, we examined their preferences for risky assets and documented their big strategic moves into equities and, later, into alternatives. We then analysed how they invest at the time of crises and the extent to which they exploit their long-horizon advantage. We found that, on average, endowments invested countercyclically at crisis times, particularly by increasing their allocations to risky assets after a crisis.

About the Author(s)

David Chambers

David Chambers is academic director of the Centre for Endowment Asset Management and the Invesco Reader in Finance at Cambridge Judge Business School, University of Cambridge, and a fellow of Clare College, Cambridge, United Kingdom; he is a Research Fellow of the CEPR.

Elroy Dimson
Elroy Dimson FSIP, PhD

Elroy Dimson is chair of the Centre for Endowment Asset Management at Cambridge Judge Business School. His research focus is long-horizon investing and responsible investing, and his publications are on active ownership; investment management; endowment strategy; environmental, social, and governance investing; and financial market history. Professor Dimson’s books include Triumph of the Optimists, Global Investment Returns Yearbook 2020, Financial Market History, and Endowment Asset Management. His recent articles are on art investment, active ownership, real assets, financial history, endowment strategy, factor investing, fossil-fuel divestment, and asset management. Professor Dimson is chair of the advisory and policy boards of FTSE Russell and serves on the Supervisory Council of the Geneva Finance Research Institute, the Review Board of CFA Institute Research Foundation, and the Investment Committee of Gonville & Caius College, University of Cambridge. Previously, he served as chair of the Strategy Council of the Norwegian Government Pension Fund Global and as a professor and governor at London Business School. Professor Dimson is a fellow or honorary fellow of CFA UK, the Institute of Actuaries, the Royal Historical Society, the Risk Institute at Ohio State University, and Gonville & Caius College. He is emeritus professor of finance at London Business School, where he earned his PhD.

Charikleia Kaffe

Charikleia Kaffe is a researcher at the Centre for Endowment Asset Management, Cambridge Judge Business School, University of Cambridge, United Kingdom.