Hi everyone, Do endowments generally have “above average” risk tolerance because they have such long time horizons? I thought they did, but then schweser has an answer where they say that “average” is relative to other similar institutions, so most endowments must have average risk tolerance. Thanks, Ari
I would disagree with average, most of them have above average risk ability because of long time horizons and no contractual liabilities.
I also think it depends on whether the endowment is funding a significant portion of the sponsor’s operating budget. Typically if it funds 5% or less then it is not considered significant.
Agree with Kelly. Depends on the purpose of the endowment. If the organisation it is supporting relies heavily on the income from the endowment then moderate changes in it’s value can have a large impact on that organisation.