Endowments & Foundations
When it comes to portfolio management for foundations and endowments, the general trend is to focus resources on manager selection. However, superior performance requires an awareness of all the different risk sources of a portfolio so that real diversification and better returns for the risk undertaken can be achieved.
Endowments and Foundations
Understanding risks in a portfolio of assets due to different risk factors and how these risks interact with each other provides clues for the diversification of the portfolio in order to reduce risk while achieving superior performance. In most cases, foundations and endowments lack the resources to holistically measure and diversify their strategic risk exposure, potentially exposing themselves to risks that are unintended or greater than expected.
Risk-Factor Analysis Needed for Endowments & Foundations
For investors seeking to properly measure risk across a portfolio, risk-factor-based analysis along with the analysis of the interaction between different risks can offer more in-depth transparency of how to deal with these risks. The unavailability of this risk-factor-based risk analysis and its interactional effects can result in a meaningful gap between investment objectives and portfolio design. To reduce this potential shortfall, foundations and endowments must consider a risk-based approach to asset allocation. Gateway Partners can help them accurately assess their exposure and position their portfolios to better reflect their views and enable them to navigate difficult market environments.
A risk-based approach to investment strategy begins with an analysis of a portfolio underlying exposure to risk factors, the fundamental market forces that drive risk and return. A portfolio that appears diversified from an asset class standpoint may, in fact, be largely concentrated in certain risks present across multiple asset classes.
