Colleges consistently depend on using a certain percentage of the returns from their endowment every year, but because of the near zero percent interest rate environment they find themselves having to rethink their investment strategies.
"We do it in a variety of ways and its not just in stocks and bonds. We do it with a certain investment style that includes things in the short-term and in the long-term that will perspectively go higher. Right now that is
Texas Christian University's Endowment:
- 23 percent to Hedge Funds
- 12 percent to Private Equity
- 5 percent to Real Estate
- 15 percent to Commodities
Charles Cocke, the managing director of Investure, which manages over ten endowment schools, has a slightly different approach.
"We spend almost all of our time trying to understand what something's worth. Commodities are particularly hard to do that on. But I do think there is some opportunity in good businesses available at reasonably prices. I mean you can buy businesses that are extremely high quality and have almost double-digit free cash-flow yields. The question is, does the market care?," Cocke said.