Most college endowments and public pension funds are plowing more and more money into complicated and expensive "alternative investments" such as hedge funds and private equity in a failed effort to boost returns. However, my analysis, combined with
a recent study of college endowment fund returns and
a study of public pension returns, proves most would be better off if they simply indexed all their money. In fact, my simulation of
index fund returns would have placed easily in the top 25% of all college endowments.
|
1-year |
5-year |
10-year |
| Median Public Pension Fund |
21.6% |
4.7% |
5.7% |
| Median College Endowment |
19.8% |
4.6% |
5.5% |
| Simulated Index Fund Returns* |
22.3% |
5.8% |
6.2% |
Perhaps a difference of 0.5% may not seem like much, but it is HUGE when one considers the dollar amounts involved. A difference of just 0.5% per year over 10 years amounts to:
