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Endowment Management: An Analysis of Decision-Making Strategies and Assessing Risk of Alternative Investments
Siradakis, Anthony J.
Siradakis, Anthony J.
Abstract
As the domestic and world economy has rebounded following the near economic collapse of 2008, university endowments have been among the largest beneficiaries of market returns. Strong performance figures have originated from capital allocations in both traditional and alternative investments. Furthermore, economic and financial literature has continued to examine the investment practices of chief investment officers and endowment managers, seeking to understand the unique financial position of endowments, their investment strategies and practices, and to establish a series of replicable mechanisms for reproducing similar performance. Yet within the current literature base little is known regarding the precise decisions of endowment managers when allocating capital towards traditional and alternative investments. More specifically, it remains unknown how, and if, behavioral biases contribute to the decisionmaking process, either positively or negatively affecting investment outcomes. Psychological and behavioral biases provide lenses for better understanding how predispositions inform decision-making by chief investment officers regarding specific investment strategies. This study employed a mixed-methods, multiple-case study approach using theories of behavioral finance as a framework for analysis. Interviews were conducted with eight chief investment officers and endowment managers representing institutions among the largest university endowments according to dollar value. The research found no presence of bias among participants and revealed a general awareness of the role behavior plays within endowment decision-making contexts.
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2020-01-01
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Education
DOI
https://doi.org/10.25774/2wmr-7h52