What Endowments And Foundations Want

Date: Thursday, October 5, 2006
Author: Dailyii.com

The way to the heart of endowments and foundations appears to be far from outrageous returns from their hedge fund and private equity investments. According to a survey by Fidelity Investment unit Pyramis Global Advisors, these two institutional investors plan to increase their allocations to alternative investments despite worries about risk, as long as they can see 10% growth in private equity (and equity) and 7.4% from hedge funds along with low volatility. Pyramis, which also included venture capital and commodities in its study but did not release information on them, found that endowments and foundations surveyed had an average 20% allocation to alternatives, in contrast to 6% for pension funds. Some of the larger ones, says Pyramis, put as much as 35% of their cash in alternative investments. They might even put more, were it not for the fact that 67% of executives polled said they have a tough time measuring the risks associated with these investments. The executives three top concerns, Pyramis notes, are a lack of transparency, lack of internal expertise (which the fund managers themselves admit) and uselessness of dated data.