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Alternative Market Briefing

The Endowment Model is not dead, says Mark Yusko of Morgan Creek Capital

Thursday, May 27, 2010

From Sagar Chakraverty, Opalesque Asia:

The financial crisis exposed the risks of the 'Endowment Model of Investing'. The two primary risks - volatility and illiquidity - appeared to be much greater than expected, particularly when excessive leverage is used. The model suffered a severe blow during the crisis and going forward, the biggest challenge would be how to convince institutional investors to put in capital when the sole concept of the model is anti-liquidity biased.

However, Mark Yusko, the CEO and CIO of North Carolina-based Morgan Creek Capital Management said: "The endowment model is the most viable proposition for long term investors."

Being a veteran of the 'endowment investment model', Yusko claimed that the endowment model did not break down after the 2008 crisis, in a recent video interview with Matthias Knab, the founder of Opalesque. He also explained the fundamental aspects of investing, which are often overlooked by professional allocators.

Morgan Creek provides investment advisory services that follow the endowment model, providing outsourced solutions and FoFs to individuals and institutions. It has offices in New York, Hong Kong and Beijing and advises $10bn of client assets. The firm focuses on three things - asset allocation, manager selection, and portfolio construction - asset allocation being the greatest focus. Around 4000 manager ......................

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