Private equity idea: Think like an endowment

Institutions have long allocated to private markets, very broadly speaking, for a combination of reasons that include potential for alpha, diversification, and, as long-term investors, in seeking a measure of consistency at scale. Family offices and larger institutional investors including pensions, foundations, and endowments have long recognized the benefits of investing in private markets. However, a leap into private equity investing is not to be taken lightly for individual accredited investors. “Think like an endowment” discusses factors related to private market investments for mass affluent investors in light of a recent SEC proposal.

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The views expressed represent the investment team’s assessment of the market environment as of June 2020, and should not be considered a recommendation to buy, hold, or sell any security, and should not be relied on as research or investment advice. Views are subject to change without notice.


Investing involves risk including the possible loss of principal. The investment capabilities described herein involve risks due, among other things, to the nature of the underlying investments. All examples herein are for illustrative purposes only and there can be no assurance that any particular investment objective will be realised or any investment strategy seeking to achieve such objective will be successful. Past performance is not a reliable indication of future performance.

Past performance does not guarantee future results.

Diversification may not protect against market risk.

Equity securities are subject to price fluctuation and possible loss of principal.

Private equity investments may entail a high degree of risk and investment results may vary substantially on a monthly, quarterly, or annual basis. Among many risk factors, some are particularly notable. These include, without limitation, the general economic environment, the health of the housing market, employment levels, the availability of financing, the quality of servicing the assets backing the securities, the seniority and credit enhancement levels for structured securities, government actions or initiatives and the impact of legal and regulatory developments. Diversification may not protect against market risk. Additionally, private equity strategies may represent speculative investments and an investor could lose all or a substantial portion of his/her investment. Investors must have the financial ability, sophistication/experience and willingness to bear the risks of an investment in a private equity strategy.

Liquidity risk is the possibility that securities cannot be readily sold within seven days at approximately the price at which a fund has valued them.

The Wilshire 5000 Total Market Index (Wilshire 5000) measures the performance of all US equity securities with readily available price data. Named for the 5,000 stocks it contained at launch, the Wilshire 5000’s base is its Dec. 31, 1980 capitalization of $1,404.596 billion. Three versions of the index are maintained: one weighted by full market capitalization, one weighted by float-adjusted market capitalization, and one for which all securities are weighted equally.

The Cambridge Associates LLC US Private Equity Index® is a horizon calculation based on data compiled from 1,468 US private equity funds (buyout, growth equity, private equity energy and subordinated capital funds), including fully liquidated partnerships, formed between 1986 and 2017.