Russell C. Trustee Investment Strategy for Endowments and Foundations

Wiley, 2006. – 250 p. – 0470011963, 9780470011966Trustees are responsible for the stewardship of assets and for implementing the mission of their endowment or foundation. Almost invariably trustees delegate the management of those assets to agents who are investment professionals.
In this increasingly sophisticated and litigious financial world there can be a growing gap of comprehension, exacerbated by mathematics and jargon, between trustees who are responsible and agents who are accountable.
This book aims to fill that gap. The book draws on the author's own experience and research and that of generations of investment professionals and academics to explain the fundamentals of investment strategy.Foreword ix
Preface xi
Acknowledgments xviiEndowment fund characteristics
Constraints on endowments 4
History rhymes
The US endowment experience
Structure of the book
Language of Return
Economic return
Investment return
‘Other income’ not return
Income, capital and ‘total return’
Real and nominal return
Absolute and relative return
Arithmetic and geometric return
Time-weighted return and money-weighted return
Elements of Return
Deriving return
Risk-free return
Premium for risk
Equity risk premium
The eighth wonder of the world
Valuation change
Drivers of return
Scenario analysis
Understanding Risk
Description of risk
Pascal’s Wager
Chance
Co-movement and common factors
The Greek alphabet
Confidence
Consequences
Endowment fund risk
Spending Rules
The endowment dilemma
Micawber’s rule
Pattern of flows
More scenario analysis
Determining an operating rule
Assets for Strategy
Back to the future
Investment approach
Classification of assets
Asset categories
Equities
Private equity
Real estate
Commodities
Hedge funds
Legal, Social and Ethical
Quis custodiet ipses custodies?
Tax matters
Extra-financial issues
Corporate governance
Corporate social responsibility
Socially responsible investment
Program-related investment
Global view
Reality check
Understanding Strategy
Resource assessment
Defining needs
Quantifying needs
Spending rule
Operational assets
Intergenerational assets
Review
Implementing Strategy
Investment policy statement
Trustees of an endowment
Investment committee
Investment staff
Risk tolerance and control
Operational asset management
Intergenerational asset allocation
Benchmarks and performance
Consultants
Selection of asset managers
Costs
Custody
Synopsis
References and Reading Matter