"Our goal with regard to both of these categories has been to provide index-like returns with adequate diversification and hope that the U.S. stock portion of the portfolio outperforms the U.S. indexes. So far, so good," Seegmiller said.
He said it is important to note that the endowment rebalances once per year, and since 2008, rebalancing has resulted in purchasing additional fixed income almost every year.
Mishra said bond ETFs are becoming more popular due to diminishing liquidity for individual fixed-income securities. Due to enhanced regulatory requirements after the financial crisis, banks have curtailed their market-making activities in bonds. Banks' inventories of bonds have come down substantially and with reduced liquidity, executing individual bond trades is not only more expensive (due to higher trading costs) but also more time consuming now. As such, many investors prefer to buy low-cost, diversified bond ETFs instead of individual bonds."
For the past 10-year period, Southern Virginia's annualized return was 11.2 percent. For the most recent fiscal year, 2015, its return was 10.5 percent. The average return last year for all endowments was just 2.4 percent.
There is one important caveat to the David versus Goliath endowment success story, which Seegmiller explained to the Times. When he took over the fund in 2008, it was almost entirely in certificates of deposit, and that made a move into stocks, at the depths of the financial crisis, "a no-brainer." It's a timing advantage that can't be recreated, and no doubt contributed to the endowment's performance relative to peers.
To read the full New York Times report on the David vs. Goliath battle among the endowment funds, click here.