We are on our way home today after a great time in Vancouver. This is a must visit destination.Yesterday in the FT Gillian Tett had an article about the Government Investment Corp (GIC) of Singapore which is a sovereign wealth fund. The article had a few quotes from GIC officials questioning the Harvard and Yale models for portfolio construction.
Keeping tabs on these makes for fun reading but I believe is also very constructive for learning. My take all along has been that it makes no sense to try to copy what the endowments do but they can influence a portfolio. For example I find it noteworthy when they make changes to how much they have in "real assets." I am not a fan of 25-30% in real assets for any retail type portfolio but when Harvard or Yale, for example, goes from 20% to 30% in real assets (or some other large change) they are clearly expressing an opinion about something. Allowing that to influence you in going from 2% to 4% or some other change that would not involve you betting the house is reasonable.
A few times in the past I've mentioned Jack Meyer's (former HMC CEO) influence on me in keeping Plum Creek Timber (PCL) for quite a few years. Generally it was a good hold most of the time (not 100% of the time of course) and while I did sell it a while back the influence was clear. While I believe in the concept of timberland's low correlation it is very difficult to capture in a stock or ETF I find it useful to keep tabs on this space. Sino Forest (SNOFF) is a popular name from Canada but it seems to go in the same direction as the market but with greater degrees of magnitude.A different type of example from endowments that can be just as important is what not to do. Harvard and Yale have always allocated large portions to various types of illiquid pools of capital. I've never been a fan of that for several reasons. I know firsthand that people have unexpected things come up that must be paid for. Paying for the unexpected becomes difficult if too much of your assets are tied up in an illiquid investment--even if it is doing well.
Additionally the crisis brought home another point which is that these types of investments don't always do well. There were all sorts of strains placed upon these pools and investors in those pools. It is well known that Harvard was in real trouble for a short while there and could only get absurdly low bids.In the future it is a very good bet that the endowments will get it right more often than not and they will continue to be a way to learn more about investing but occasionally they will be wrong in a very noteworthy fashion and that will also be a learning opportunity.
The first picture is from the other day driving back from Deep Cove on the Iron Workers Memorial Bridge. The second picture is from Granville Island which some compare to Pike Market Place in Seattle. The food was good and the shopping was not (yippee). The last picture is from the West End.
5 comments:
I do not like illiquid investments. I also do not have a 50 year or more time horizon which might be appropriate for a university. I do not think they are good models for people, not that we can not learn from them.
Vancouver is a beautiful place just about any time and magnificent in summer. Not cheap for Americans, particularly now that the Loony is basically at parity with the $USD, but still worth it and Canadians are also surprisingly generous and fun too; surprising for an oppressed people living in a socialist hell I mean. [g]
If you've got a week or so to spare I recommend a cruise of the inland waterway between Washington state and Alaska w/ some stops along the way (Vancouver, Juneau, etc) but not on a cruise liner, take the ferry instead; e.g., http://tinyurl.com/dgowfd Took the Bellingham to Whittier ferry some years back and it was truly memorable and liked being able to get off and stay a bit if I felt like it (no cruise schedule to worry about); I assume it still runs. I wanted to take the train from Skagway to Whitehorse too but ran out of time; told myself I'd do it some other day but never did.
Looking over the Moneyshow show web site I was amused to see a presentation on the "Comeback in DRiP Investing." That's how I started out over 30 years ago, investing w/ companies that allowed you to buy their stock directly in a DRiP (broker commissions were too steep in those days) and I've still got a few, one of which I've owned for nearly a quarter century now.
Didn't watch the video (http://tinyurl.com/y5jdcne) but am not sure I'd feel the same now w/ commissions low and companies handling DRiP accounts through an agency instead their own investor relations staff (intermediation = added cost somewhere; TANSTAAFL) but for those who like the idea of growing with an established company slow and steady it probably still makes sense.
Regarding your comments on Timber, I guess I don't get it as an asset class anymore. I noticed that Grantham has managed timber as a growth opportunity over the next 7 years. With a large inventory of current houses at least in the US and trends to online access instead of paper media where is the longer term timber usage coming from? Exports to foreign markets for housing?
Ditto Roger and RW. I was last in Vancouver a dozen years ago visiting a client and I can remember thinking good lord this is inexpensive for a top hotel, dinners, wine, etc. Drop dead gorgeous place. My how things can change in just a decade....
9:42 - I own P&G and KMB so I consider RYN sort of a hedge or ancillary for those big pulp consumers. Maybe it's just me but the price of toilet paper, paper towels, etc seems to have really risen the last few years.
Also think about packaging if the global economy is growing. Widget covered in plastic and cardboard covered in styrofoam inside bigger cardboard box along a dozen other same packaged widgets inside an even larger cardboard box.
Hello Roger,
glad that you are having fun in Vancouver, with Joeleen. I am working hard on my system and now am introducing a simulator. As I mentioned, from time to time I will peek and leave a word. Glad to read RW post. SEG, how is your monetary model doing? How far along are we into this expansion and how long will it last? MikeC, hope you had a good quater, I am sure you did.
Best,
Jeff from Milan, Italy
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