Ivy Endowment Fund Investment Portfolio

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Ivy Endowment Fund Investment Portfolio

For ETF investors who seek solid performance with low volatility
 60% Stocks |  20% Bonds |  20% Alternative | 


 Data through August 31, 2016

FUND NAME SYMBOL % OF
PORTFOLIO
YTD
RETURN
1-YR
RETURN
3-YR
RETURN
5-YR
RETURN
10-YR
RETURN
MAX LOAD EXPENSE RATIO
AlternativeBioShares™ Biotechnology Clinical Trials FundBBC10%-30.93%-35.46%—%—%—%none%0.85%
BondVanguard Total Bond Market Index ETFBND106.026.164.363.2none0.06
AlternativeiShares S&P GSCI(tm) Commodity-Indexed TrtGSG100.28-21.44-25.03-16.17-11.25none0.84
StockSPDR DJ Wilshire Intl Real Estate ETFRWX108.319.056.156.81none0.6
BondiShares Lehman US Treas Infltn Prot Sec BondTIP106.615.272.591.644.31none0.2
StockVanguard Small Cap ETFVB1011.049.359.7813.928.48none0.08
StockVanguard FTSE All-World ex-US ETFVEU105.213.612.643.66none0.13
StockVanguard REIT ETFVNQ1013.9325.615.9313.456.87none0.12
StockVanguard Total Stock Market ETFVTI108.0311.4211.6914.437.75none0.05
StockVanguard Emerging Markets ETFVWO1014.7410.652.08-0.43.85none0.15
   1004.312.443.034.052.01 0.32
** Closed to new investors. # Closed to new investors; other share classes are available.
r Maximum redemption fee charged when you sell shares. s Front-end load; redemption fee may apply.
— Fund has not existed for the specified time. Source: Morningstar, Inc..

From June 1985 through June 2008, Yale's endowment returned an annualized 16.6%, an average of five percentage points per year better than both Standard & Poor's 500-stock index and a balanced index holding 60% in stocks and 40% in bonds. That's a 40-fold multiplication of wealth.

The fund achieved that feat with one-third less volatility than the S&P 500 and only one down year (losing 0.2% in the year that ended in June 1988, a period that included the crash of 1987) and compiled a Sharpe ratio of 1.12 over that 24-year span. (The Sharpe ratio is academic lingo for risk-adjusted return. A ratio in excess of 1 for a long period is a relatively rare event.)

You can't precisely replicate the Ivy endowment portfolios. When Benjamin Franklin opined that the only certainties in life are death and taxes, he evidently wasn't thinking about university endowments. Unlike the rest of us, the funds pay no taxes and never perish. Moreover, the endowments have huge staffs and access to investments, such as private-equity partnerships and hedge funds, that are unavailable to the common folk.

Still, Mebane Faber, a money manager in El Segundo, Cal., who analyzed the "super endowments" of Yale and Harvard for the book The Ivy Portfolio (John Wiley & Sons, 2009), thinks you can learn much from endowments' risk-management techniques -- for example, the way the funds combine portfolios of risky but uncorrelated assets in a way that should, over time, produce respectable risk-adjusted returns. Portfolios such as these are prepared for almost any scenario (for example, inflation or deflation; dollar strength or dollar weakness) and should enjoy much of the fruit of bull markets while dampening the downside of bear markets.

Based on his study of the Ivy endowments, Faber constructed this low-cost portfolio of ten exchange-traded funds that draws on the Ivies' methods of allocation, diversification and risk management.