That puts more responsibility on the shoulders of university endowment asset managers to vet the funds before they invest.
“You have to have hedge funds in your strategy,” says Evans at Howard. “You need to do your due diligence, and they have to be in the top 10 percent. I don’t care how good they say they are.”
Says Jeff Margolis, director of institutional sales and marketing at TIAA-CREF, “Overall, use of hedge funds is still increasing, but it has peaked and has started declining for now among some of the early adopters, generally the largest endowments.”
College endowment officials may still be smitten enough to take the plunge, but if they do, they must be ready for the unexpected. That’s a lesson that’s been learned the hard way at DePauw. “It was a substantial loss, but it wasn’t crippling,” says Owen, DePauw’s spokesman.
E-mail the Author: pgaluszka1@comcast.net
What Are Hedge Funds?
Like mutual funds, hedge funds pool investors’ money and invest those funds in sophisticated financial instruments in an effort to make a positive return. Many hedge funds seek to profit in all kinds of markets by pursuing leveraging and other speculative investment practices that may increase the likelihood of investment loss.
Unlike mutual funds, hedge funds are not required to register with the U.S. Securities and Exchange Commission. This means that hedge funds are subject to very few regulatory controls. Because of this lack of regulatory oversight, hedge funds have generally been available solely to accredited investors and large institutions. Most hedge funds also have voluntarily restricted investment to wealthy investors through high investment minimums, often more than $1 million.
Source: www.sec.gov
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