Endowments Outperform Up and Down Markets?

I've written before about the interesting financial allocations that Harvard's Endowment and others like it (read Princeton and a few others) have used recently. They include higher than normal investments in private equity (11% of total), timber and agriculture (9%) and real estate (9%). Likewise, they show a mere 12% allotment to domestic stocks, well below normal, while a full 20% was invested in foreign and emerging markets stocks (normal recommendation is around 10%).

In the relatively up markets of recent years (until this year!) these allocations have served the endowments well, with overall performance beating a "normal" portfolio with 65% stocks and 35% fixed income handily, and regularly beating the SandP 500 index (e.g. fiscal 2007 ended June 30 Harvard up 23%, SandP 500 20.6%).

Now with a deep Bear market, Harvard has announced it is down 22% through October, and expects to be down by 30% through fiscal 2009. We'll have to wait and see if this beats the normal allocations, but they are ahead of the SandP 500 performance, down 24% 4 months through October.

If these results hold up Harvard will be able to boast that it beats normal allocations in both up markets and down markets, and we'll start to see more copycat portfolios in the market. Something to watch, and emulate?

Sources, NY Times, Google Finance, www.bloggingstocks.com, and CNN Money.