Endowment asset allocations: insights and strategies

Abstract

Using monthly data from 1997 to 2023, we construct mean-variance optimized portfolios of common university endowment asset classes, including domestic equity, international equity, global bonds, hedge funds, private equity, real estate, and natural resources. We find substantial variation in optimal allocations to these asset classes across subperiods. Some asset classes are substantially more persistent in receiving allocations than others, while some asset classes rarely receive sizable allocations at all. Our results highlight the relevance of asset allocation in portfolio performance and may inform future decisions by institutional investors and endowment portfolio managers.