08.08.16

The Household Endowment Model

Some leading educational endowments were able to outperform markets through various cycles depending on the level of their sophistication. These endowments credit their investment performance to a disciplined and clearly defined approach of allocating to distinct asset classes. These classes include, but are not limited to, public equity, real estate, private equity, fixed income, natural resources and commodities. Notwithstanding their mandates to meet the intermediate and long-term inflation-adjusted spending needs of their respective institutions while simultaneously meeting inflating targets, these endowments were able to outperform broader indices through various market cycles with significantly less volatility. This paper explores the plausibility of implementing an endowment-style approach for retail investors. We identify important issues, considerations and challenges, and suggest that there is a place for an endowment-style approach to individual investing.