Читать книгу Alternative Investments - Black Keith H. - Страница 72

From a risk-budgeting perspective, many endowment managers prefer to spend the majority of their active risk budget in alternatives. On average, these large investors allocate to eight managers within traditional asset classes and more than 11 managers in alternative asset classes. Endowments have exploited both their networks of successful alumni and their first-mover advantage in allocating to the best-performing managers, many of whom have now closed their funds to new investors. While common wisdom assumes that the sole secret to endowment success is the large allocation to alternative investments, the top endowments enhance performance further by allocating to managers who outperform. In fact, the largest endowments have historically outperformed in nearly every asset class, both traditional and alternative. Those investors seeking to replicate the success of endowments should be cautioned that although this outperformance within asset classes can add up to 2 % per year to performance, it is unlikely to be replicated by an alternatives-heavy allocation if investors lack the talented staff and valuable network of invested managers that many endowments have cultivated.

An examination of university annual reports shows that in addition to an alternatives-heavy asset allocation, which can enhance returns and reduce risk, many universities have superior security selection and manager selection skills. This skill, or high risk tolerance, is seen when examining the return in each asset class portfolio compared to that asset class's benchmark. Harvard's 2014 annual report shows that returns beat asset class benchmarks annually over five years, including 1.9 % in real assets and 3.9 % in absolute return, while falling 0.5 % behind the private equity benchmark. Even in the asset classes considered to be most efficiently priced, such as publicly traded equity and fixed income, Harvard outperformed annually by 0.6 % and 2.9 %, respectively, over the same period. In total, Harvard's entire endowment portfolio beat the return on the asset-weighted benchmark by 1.4 % annually, adding more than $1 billion in excess returns in just five years.

Swensen (2009) demonstrates the importance of manager selection within the alternative investment universe. In liquid, efficient markets, the dispersion of returns across asset managers is relatively small. For example, in U.S. fixed income over the 10-year period ending in 2005, there was a mere 0.5 % difference in returns between managers at the first and third quartiles of returns. Equity markets have return dispersion across managers of between 1.9 % and 4.8 %. Pension plans often invest in passive index funds rather than with active managers in traditional asset classes. However, index funds are generally unavailable in most alternative investment asset classes. Siegel (2008) cites literature that documents the difference in annual returns between managers ranked at the 25th and 75th percentiles. These numbers are relatively small in traditional assets, with 0.5 % in fixed income, 2.7 % in U.S. equity, and 3.9 % in non-U.S. equity.

In contrast, the value added by active managers in alternative investments can be quite substantial. In inefficient markets, managers have a greater opportunity to profit from skill, information, and access to deal flow. Dispersion in alternative investments is much higher, with 7.4 % in hedge funds, 14.2 % in private equity buyouts, and 35.6 % in venture capital. In many cases, especially in private equity, investments are not attractive when investing in the median manager. In order for a private equity investment to outperform public equity on a risk-adjusted basis and adequately compensate for the liquidity risk in these investments, investors need to allocate to managers who deliver returns far above the median manager in each asset class.