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Is A Diversified Portfolio Better Than A 60/40 Portfolio? A 10-Year Comparison Study Of A University Endowment

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  • Barbara von Brandt
  • Lucien R. Costley

Abstract

The following examines the performance of an actively managed university endowment and compares the result to the return of a passive, index-based investment comprised of 60 % U.S. equities and 40 % U.S. bonds. From 2013 to 2022, the results show that the endowment underperformed the passive 60/40 index fund in each of the last 1-, 3-, 5-, and 10-year periods. The compound annualized growth rate (CAGR) over the 10-year period was 6.5% for the actively managed endowment compared to 7.8% for the 60/40 index fund. Incorporating novel asset classes into an actively managed portfolio does not guarantee better returns than investing in a low-cost 60/40 index fund.

Suggested Citation

  • Barbara von Brandt & Lucien R. Costley, 2022. "Is A Diversified Portfolio Better Than A 60/40 Portfolio? A 10-Year Comparison Study Of A University Endowment," Global Journal of Business Research, The Institute for Business and Finance Research, vol. 16(1), pages 135-143.
    • Handle: RePEc:ibf:gjbres:v:16:y:2022:i:1:p:135-143
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    More about this item

    Keywords

    Endowment Management; Active Versus Passive Investing; Asset Allocation; ETFs;
    All these keywords.

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance

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