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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Tommaso who wrote (91171)	6/9/2001 11:36:54 AM
From: George Acton	Read Replies (2) \| Respond to of 132070

Barron's wrote up the Harvard endowment a few years ago, and they're so diversified that they inevitably took some gas in the last year. But they participated in the run-up of the late 90's, so there's a nice cushion. It's ancient history, but an instructive example of the effects of simple decisions is the relative performance of the Harvard and Yale endowments in the 1945-1968 period. Both and been severely burned in the Depression, and the Yaleys had adopted, with typical self-importance, the "Yale Plan" which meant a simple-minded allocation to half bonds and half equities. This had the effect of constantly reducing exposure to stocks during one of their greatest historical runs. The Harvard endowment was more flexibly managed, stayed in stocks and put some money into venture capital on the Rt 128 companies, the Silicon Valley of the time. It was mostly managed by one Boston Brahmin who was sharp enough to buy DEC before the IPO. The two endowments had started out roughly equal, but at the end of the period Harvard's was twice the size of Yale's. The sequel was that McGeorge Bundy, an alum of both schools, and fresh from managing the Vietnam War, became head of the Ford Foundation, which issued an influential report concluding that all university endowments had been managed with unwise timidity. This encouraged dozens of universities to plunge into stocks just in time for 1973-74. Some students of the history think Bundy did more harm to the country as a investment advisor than as a military strategist. I don't know what lessons to draw from this history. Perhaps the correct one is just to listen to smart people and fade wrong-headed people. Or maybe it's the difficulty even smart people have in identifying major changes in trends. Bundy was clearly highly intelligent and had a fine education, so perhaps he was just in the wrong place at the wrong time. --George Acton