There is a fascinating article in the Chronicle of Higher Education on the continuing asset shift at many colleges and charities into alternative investments (i.e., hedge funds, private equity, venture capital, etc.). The Purdue example is particularly striking:
Purdue University … has rapidly increased its
alternative investments and plans to nearly double its allocation to
alternatives again in the near future. In 1999 it had almost nothing
invested in nontraditional assets, and nearly 90 percent of its
endowment was invested in stocks â€” which put the institution in a
precarious position when the stock market tumbled. The endowment
dropped nearly $300-million, to $1.1-billion, over the three years
ending in June 2003, which prompted Purdue to diversify.
In 2005 the university had 22 percent of its assets in alternative
investments, including real estate, and the $1.34-billion endowment
earned 11.9 percent over all for the fiscal year ending in June.
Purdue’s investment committee approved a plan in April that calls for
the university to put 39 percent of its assets into alternatives within
three to five years.
Get that? Purdue has gone from zero percent in 1999, to 22% in 2005, and is heading for a 39% allocation to alternative investments by 2011. Remarkable stuff.