Asset Allocation

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ph4t

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I saw the Asset Allocations of Harvards and Yales endowment funds in [broken link removed]. Would a similiar allocation be suitable for individuals presuming they could get access to the asset classes?

Harvard
Domestic Stocks 15%
Foreign Stocks 15%
Bonds 27%
Real Estate 10%
Commodities 13%
Private Equity 13%
Hedge Funds 12%
TOTAL 105%

Yale
Domestic Stocks 14%
Foreign Stocks 14%
Bonds 5%
Real Estate 12.5%
Commodities 12.5%
Private Equity 17%
Hedge Funds 25%
TOTAL 100%
 
Maybe yes, maybe no, but I would suggest that an individual's asset allocation strategy might be different from that of an educational establishment. Why not look at that of our own National Pensions Reserve Fund:
​
% Asset Allocation​
Large Cap Equity
63
Small Cap Equity
4
Emerging Markets Equity
2
Total Quoted Equity​
69
Property
8
Private Equity
8
Commodities
2
Total Additional Assets​
18
Bonds​
13
 
A search on asset allocation will throw up other threads on AAM on this topic. You should also read Roger Gibson's book 'Asset Allocation', referred to in other threads.
 
Large trust funds generally have to be fairly risk averse.
The trustees can be sued for exposing the trust to too much risk (if it results in some loss to the trust fund), but not for exposing it to too little.

Depending on your age, you may be more risk tolerant than these.
 
Hope you are rather wealthy if you plan to put 12% of your assets in a hedge fund.
 
Endowment funds like the Yale one and pension funds have different objectives, that's why the asset allocations are different.

If you are trying to generate a certain amount of income every year without reducing the real value of your assets, which will survive you, invest like an endowment fund. (If you're very rich, for example.)

If you are trying to accumulate money during your working life with a view to living on it during your retirement, and if you're not too bothered about leaving something behind when you die, then invest like a pension fund.
 
The Yale allocation is fairly aggressive,this is because they recognise their time horizon as infinite.
 
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