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Endowment Index™

EWM in the News: Real Assets Adviser Features EWM’s CIO Prateek Mehrotra in Comprehensive Perspective on the Endowment Model

By Alternative Investments, Endowment Index™

Prateek Mehrotra, MBA, CFA®, CAIA®, Chief Investment Officer of EWM is quoted extensively in this month’s Real Assets Adviser magazine.  In an article titled Endowment Model Takes Its Lumps: It has been a rough year or two, but proponents remind detractors that the model is built for long-term investment strategies, author Steve Bergsman collects viewpoints from several industry professionals analyzing the broad asset allocation of the endowment model and how the various underlying asset classes have contributed or detracted from performance in both recent years and over the long term.  Click on the link to read the entire article.

University Endowments Reporting Significantly Improved Investment Returns Over Past Fiscal Year

By Endowment Index™

Early reporting data from schools providing endowment performance for the fiscal year ended June 30,2017 suggest that university endowments boosted their investment returns significantly over the last fiscal year from 2016. The median gain for all colleges reporting is 11.3 percent, while the median gain for larger schools (over $500 million in assets) was 13.3 percent for the 12-month period ended June 30th as reported by the Wilshire Trust Comparison Service. Comparatively, the Endowment Index® gained 13.47 percent during the period. Read the full article by Janet Lorin at Bloomberg.com.ewm-e-logo-tm

Multi-Asset ETF Portfolio Best Route for Smaller Endowments, Isenberg Professor Says

By Endowment Index™, ETF Related

Hossein Kazemi, senior adviser to the Chartered Alternative Investment Analyst (CAIA) Association and professor of finance at the Isenberg School of Management at the University of Massachusetts, is claiming that many endowments should skip investments in illiquid assets such as hedge funds and private equity in favor of a multi-asset ETF portfolio.

Kazemi argues that most endowments should not attempt to mimic the Harvard or Yale Endowment portfolio mix by including a vast array of alternative investments, because few of them have the kind of access to top-tier managers that they do, which can lead to “pretty pricey underperformance”.

Kazemi goes on to say that smaller endowments should pursue a specific ETF mix that can provide a more stable return with less of the cost. This mix, according to Kazemi, should provide “similar exposures as a combination liquid/illiquid portfolio, minus many of the expenses associated with illiquid assets”.

Link to full articleewm-e-logo-tm

3-D Endowment Investment Philosophy®

By Endowment Index™

By Robert L. Riedl, CPA, CFP®, AWMA®

Endowment Wealth Management (“EWM”) is named after our trademarked Endowment Investment Philosophy®, and applies our investment approach, which was pioneered by university endowments seeking to improve their risk-adjusted returns. EWM is a fee-based, Registered Investment Advisor (RIA) that serves as a fiduciary adviser, putting the best interests of our clients first.
We differentiate our firm’s wealth management services from other advisers by combining our unique 3-D Endowment Investment Philosophy® with three layers of unique investment options. Our firm provides our clients access to a combination of low cost passive ETF’s, specialty active satellite managers and illiquid accredited & qualified private equity and debt investment options.
Our goal is to enhance the traditional two-dimensional 60/40 stock-bond portfolio to a three-dimensional allocation by adding a third bucket. This bucket, which it calls “risk-managed” is comprised of real assets, private equity and hedge strategies. That third risk managed allocation grew out of how Yale and Harvard have institutionally managed their university endowments for the past 20 to 30 years.
Our firm’s Endowment Investment Philosophy® is also encapsulated in our Firm’s proprietary Endowment Index® calculated by NASDAQ OMX® (symbol “ENDOW”), a rules-based benchmark based on the asset allocations of over 800 college and university endowments. The Index has garnered national attention from ETF.com, WealthManagement.com and others.

As professionals specializing in family wealth management, we appreciate that our clients trust our professional judgment not just to manage their investments, but to also help sustain the economic future of their most valuable-asset –their family. The word ‘family’ in ‘family wealth’ always comes before wealth. Having a family wealth plan is critical to the whole financial planning process and achieving sustainable multi-generational family wealth, unity and legacy. Only when a family has a comprehensive knowledge of their financial holdings, the worth of those holdings, and the related correlations between all of the holdings, can they effectively implement an investment process leading to sustainable long-term family wealth.

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MSCI announces China A-shares to be included in the MSCI EM Index: What does it mean for investors and the China markets?

By Endowment Index™

This morning the MSCI announced the landmark decision to add 222 China A-share stocks to the MSCI EM Index, all of which are accessible via the Shanghai and Shenzhen – Hong Kong Stock Connect programs.  This initial addition will account for 0.73% of the MSCI EM Index and helps pave the way for a substantial inclusion of the A-shares in the Index over the mid to long-term that will force investors to re-evaluate their view and allocation to the world’s second largest economy.

Snapshot of MSCI EM Index:

  • Index funds and ETFs have over US$2 trillion bench-marked against the MSCI EM Index with Hong Kong stocks currently accounting for around 26% in the Index.
  • If a full inclusion of China’s A-shares were realized then Hong Kong and China combined would account for more than 45% of the Index.

What the A-share inclusion means:

  • We expect an initial US$12-14 billion in assets to flow into the MSCI EM Index due to the inclusion.
  • Whilst this first inclusion is small, it holds significant relevance as we expect A-shares to increase as a constituent to account for over 18% (or over US$300 billion) of the Index in the next 3-5 years.
  • The inclusion will help to institutionalize China’s domestic markets, a move that will be welcomed by the regulators in the retail dominated markets.
  • Global institutional investors, including the world’s largest fund houses, have expressed their support for the inclusion and we expect many to re-evaluate their allocation to A-shares, both passive and active.
  • The regulators will continue to adjust the QFII, RQFII and Stock Connect programs to allow greater access to the markets and ensure a steady increase to the number of constituents added to the MSCI EM Index.

To summarize, the inclusion is a milestone event that we believe will improve the efficiency and transparency of the China markets whilst forcing investors to re-evaluate their long-term view on the China markets.

Our Endowment Index splits our exposure to Emerging Markets into two: 1) Diversified Emerging Markets allocation using “IEMG” ETF and 2) China A Shares allocation using “ASHR”. Go to www.EndowmentIndex.com to learn more about this Index.

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EWM CIO discusses the Endowment Model of Investing in Podcast with Institutional Real Estate Inc.

By Alternative Investments, Endowment Index™

Prateek Mehrotra, CIO of Endowment Wealth Management®, was interviewed this week by Institutional Real Estate Inc.  In the discussion, Prateek talks about the history of the Endowment Model and how the Endowment Index® was constructed.  Listen to the podcast.

The podcast is for information purposes only and should not be considered personalized investment advice. Investments involve risk of loss and may fluctuate in value.  You should carefully consider all risks and costs prior to making any investment.  You cannot invest directly in an index. Indexes do not have fees.

China Market Valuation Update

By Endowment Index™

China Large and Small Cap Indices seem to be approaching longer term valuation levels. Also:

  • China’s margin debt is substantially lower. Outstanding margin debt on the Shanghai and Shenzhen stock exchanges fell to 1.25 Trillion Yuan on Monday from a record high of 2.27 Trillion Yuan on June 18th. Stock market peaked on June 12th.
  • Large Cap Stocks estimated P/E ratio is approx. 10 which represents 2013 P/E 5 Year lows.
  • While valuation multiples have contracted globally, the Chinese P/E multiple has contracted more. Chinese Large Cap Stocks are now cheaper than the S&P 500 and the Dow Jones Industrials.
  • Chinese Small Cap Stocks are still trading at a higher P/E relative to US Small Cap Stocks.

We continue to maintain an allocation to China A Shares in the Endowment Index.

Press Release: Endowment Index™ Historical Data Now Available Through Morningstar, Interactive Data and Bloomberg

By Endowment Index™, News

APPLETON, Wis., Nov. 11, 2014 /PRNewswire/

Historical index data for the Endowment Index™ — calculated by Nasdaq OMX® — is now available through major index and investment databases, including Bloomberg, Morningstar, and Interactive Data.  In addition, the 30,000+ advisors on the Envestnet platform can now select the Endowment Index™ to benchmark client portfolios. Endowment Index™ data can be accessed through most major quote providers and websites under the symbol “ENDOW.” The Index’s Morningstar ID is F00000TPG6.

The Endowment Index helps trustees, portfolio managers, consultants and advisors to endowments, foundations, trusts, defined benefit/defined contribution plans, pension plans and individual investors more appropriately track the performance of and analyze globally-diversified, multi-asset portfolios. The Endowment Index™ is an objective benchmark comprised of three major asset class building blocks: Global Equity, Global Fixed Income, and Alternatives, which includes hedge funds, private equity and real assets. The Endowment Index™ is a total return index and all underlying components are comprised of exchange-traded funds or other investable securities.  Endowment Wealth Management, Inc. in collaboration with ETF Model Solutions, LLC earlier this year launched the Endowment Index™ as a benchmarking tool for investors in globally-diversified, multi-asset portfolios that include alternative investments.

Endowment Wealth Management, Inc. is an independent Private Wealth Management Firm using a Multi-Client Family Office service model, whose mission is to grow wealth for individuals, families, retirement plans, endowments, foundations and other institutions through the utilization of the Endowment Investment Philosophy™.  EWM can construct index-based portfolios for investors based upon the Endowment Index™ asset allocation.

ETF Model Solutions, LLC, is third party investment manager and ETF strategist that builds investment models for 401(k) plans, Investment Advisors within their practice, Family Offices, Endowments, Foundations, Trusts, and Individual Investors.  The Firm is the fund manager for the Endowment Multi-Asset ETF Collective Investment Fund, available for use in 401(k) and other retirement plans.

Contact:
Prateek Mehrotra, MBA, CFA®, CAIA®
Email
920.785.6010
www.EndowmentWM.com or www.ETFModelSolutions.com

Disclosure:  You typically cannot invest directly in an index. Indexes do not contain fees.  Information presented is for educational purposes only and is not intended as an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies, nor shall it be construed to be the provision of investment advice.  Investments involve risk and unless otherwise stated, are not insured or guaranteed. Be sure to consult with a qualified financial advisor and/or tax professional before implementing any investment strategies. While the firms are related and share corporate offices, Endowment Wealth Management, Inc. and ETF Model Solutions, LLC are each individually registered as an investment adviser in the State of Wisconsin. A copy of each firm’s respective disclosure document, Form ADV Brochure Part 2, is available upon request.

Link to Release

Press Release: Endowment Index Historical Data Now Available Through Morningstar, Interactive Data and Bloomberg

By Endowment Index™, News

APPLETON, Wis., Nov. 11, 2014 /PRNewswire/

Historical index data for the Endowment Index™ — calculated by Nasdaq OMX® — is now available through major index and investment databases, including Bloomberg, Morningstar, and Interactive Data.  In addition, the 30,000+ advisors on the Envestnet platform can now select the Endowment Index™ to benchmark client portfolios. Endowment Index™ data can be accessed through most major quote providers and websites under the symbol “ENDOW.” The Index’s Morningstar ID is F00000TPG6.

The Endowment Index helps trustees, portfolio managers, consultants and advisors to endowments, foundations, trusts, defined benefit/defined contribution plans, pension plans and individual investors more appropriately track the performance of and analyze globally-diversified, multi-asset portfolios. The Endowment Index™ is an objective benchmark comprised of three major asset class building blocks: Global Equity, Global Fixed Income, and Alternatives, which includes hedge funds, private equity and real assets. The Endowment Index™ is a total return index and all underlying components are comprised of exchange-traded funds or other investable securities.  Endowment Wealth Management, Inc. in collaboration with ETF Model Solutions, LLC earlier this year launched the Endowment Index™ as a benchmarking tool for investors in globally-diversified, multi-asset portfolios that include alternative investments.

Endowment Wealth Management, Inc. is an independent Private Wealth Management Firm using a Multi-Client Family Office service model, whose mission is to grow wealth for individuals, families, retirement plans, endowments, foundations and other institutions through the utilization of the Endowment Investment Philosophy™.  EWM can construct index-based portfolios for investors based upon the Endowment Index™ asset allocation.

ETF Model Solutions, LLC, is third party investment manager and ETF strategist that builds investment models for 401(k) plans, Investment Advisors within their practice, Family Offices, Endowments, Foundations, Trusts, and Individual Investors.  The Firm is the fund manager for the Endowment Multi-Asset ETF Collective Investment Fund, available for use in 401(k) and other retirement plans.

Contact:
Prateek Mehrotra, MBA, CFA®, CAIA®
Email
920.785.6010
www.EndowmentWM.com or www.ETFModelSolutions.com

Disclosure:  You typically cannot invest directly in an index. Indexes do not contain fees.  Information presented is for educational purposes only and is not intended as an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies, nor shall it be construed to be the provision of investment advice.  Investments involve risk and unless otherwise stated, are not insured or guaranteed. Be sure to consult with a qualified financial advisor and/or tax professional before implementing any investment strategies. While the firms are related and share corporate offices, Endowment Wealth Management, Inc. and ETF Model Solutions, LLC are each individually registered as an investment adviser in the State of Wisconsin. A copy of each firm’s respective disclosure document, Form ADV Brochure Part 2, is available upon request.

Link to Release

Comparing the Nation’s Largest Pension Fund Asset Allocation and Return History to the Endowment Index™

By Alternative Investments, Endowment Index™

The nation’s largest pension fund, the California Public Employees Retirement System, better known as CalPERS has been in the news this week with an announcement that they are going to be liquidating their $4B hedge fund allocation over the next year.  Apparently, the high costs and complexities, combined with their ability to scale the asset class relative to their $300B portfolio just isn’t worth the effort.

While on the surface this may seem like shocking news, in reality, this isn’t surprising – its simply another data point confirming the transition from traditional alternatives to liquid alts is real and likely to continue.  Given the higher costs, and other burdens (K-1 tax returns, lockups, accredited investor mandates, lack of transparency, scandals/Madoff, high minimums, and others) with the partnership form of traditional alternatives, its logical that more advisors and investors will continue to consider liquid alts as either a replacement for their traditional alternatives allocation, or to in an effort to enhance their traditional two-dimensional stock-bond portfolios.

CalPERS announcement prompted us to take a closer look at their portfolio as compared to the Endowment Index™ calculated by Nasdaq OMX®.  The Endowment Index represents the asset allocation portfolio holdings of over institutions managing over $400 billion in total assets.

Endowment Index™ vs. CalPERS Asset Allocation and 10 Year Return History

Endowment Index vs CalPERS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

*For 10 year period ending June 30, 2014.  Returns are annualized.

Past performance no guarantee of future results.  The above is presented for informational purposes only and is not intended as investment advice.  Index data presented for comparison purposes only. Indexes don’t have fees. You cannot invest directly in an index.  Endowment Index data prior to May 19, 2014 contains backtested data, which contains certain weaknesses.  Click here for additional disclosure on back testing.