Some aspects of risk can take a back seat when endowments and foundations (E&Fs) focus on comparing their performance to that of their peers. But E&Fs are exposed to many types of risk because of their high allocation to alternatives, their complex funding and spending structures, and diversity among their constituencies. We believe that we have an opportunity to redefine the concepts of return and risk in the E&F context.
Given the breadth of this subject, we will address the components in a white paper trilogy:
• A New Approach to an Old Concept — Improving investment policy by refining risk management
• Integrating Expectations — Human nature and the plight of the investment committee
• The Lessons and Limits of Diversification