-- Posted Tuesday, 6 October 2009 | Digg This Article | | Source: GoldSeek.com

Rick’s Picks

Tuesday, October 6, 2009

“Phenomenally accurate forecasts”

Stanford University is attempting to unload $1 billion worth of hard-to-sell assets -- a treacherous undertaking that the Wall Street Journal said was being closely watched by private equity. That's an understatement, since hundreds of the world's biggest institutional and sovereign investors have portfolios very similar to Stanford's, and many of them will be equally desperate to raise cash in these straitened times.  The portfolio model they have embraced, perhaps all too eagerly, in recent years was pioneered by Harvard University, whose endowment fund is by far the biggest in the collegiate world.  It was worth close to $40 billion several years ago -- almost twice as much as number two, Yale University --  but lost perhaps a third of its value since then due to the global collapse in asset values. nervous

Before Harvard made a dubiously fine science of aggressive portfolio management, some of the biggest sovereign funds, including those of Saudi Arabia and Kuwait, maintained a simple allocation scheme favoring stocks and Treasury paper, with a conservative skew toward the latter.  But Harvard was the first giant fund to diversify into a wide spectrum of assets that included such exotica as timberland, REITs, Norwegian fishing fleets, and mortgage derivatives. As a result, Harvard's endowment fund was one of the most spectacularly successful among the majors just a few short years ago, and it was emulated and sometimes closely replicated by many of the biggest  players in the investment world.  But around 2007, when portfolio assets began to plummet across-the-board, Harvard and all of its copycats got caught in the downdraft.

A Novel Approach

Now Stanford has ventured forward to see what some of these illiquid assets will fetch.  The school is taking a novel approach by selling only partial interests in the dubious partnerships it still holds. The sums involved total about $5 billion, or somewhat more than third of the funds overseen by Stanford Management Co.  If the sale goes poorly, it will be a grim setback for the aspirations of other big-time funds. But even if things go relatively well it might be premature to break out the bubbly, since the market could get crushed if too many other big sellers take encouragement. 

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Information and commentary contained herein comes from sources believed to be reliable, but this cannot be guaranteed. Past performance should not be construed as an indicator of future results, so let the buyer beware. Rick's Picks does not provide investment advice to individuals, nor act as an investment advisor, nor individually advocate the purchase or sale of any security or investment. From time to time, its editor may hold positions in issues referred to in this service, and he may alter or augment them at any time. Investments recommended herein should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Rick's Picks reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscribers’ initials will be used unless express written permission has been granted to the contrary. All Contents © 2009, Rick Ackerman. All Rights Reserved. www.rickackerman.com 

-- Posted Tuesday, 6 October 2009 | Digg This Article | Source: GoldSeek.com

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