Behavioral Asset Allocation for Foundations and Endowments

ABSTRACT: The behavioral asset allocation framework developed for individual investors can help foundation and endowment trustees become more comfortable with "uncomfortable" asset classes that would help overall portfolio efficiency. Eleemosynary investment, particularly at smaller charities, is typified by convention and conservatism. The behavioral asset allocation approach helps overcome this tendency by decomposing the total portfolio into timeline-based subportfolios that look to secure the nonprofit's payouts for many years and isolates the "uncomfortable" assets in the longest-term subportfolios. We advance and apply the behavioral asset allocation framework in a new context, yet one relevant for high-net-worth individuals with charitable intent.

This paper is co-authored with Steve Fraser, formerly of the U.S. Air Force Academy and now at Florida Gulf Coast University. The paper is available on SSRN as of 29 June 2006.
The paper was updated on SSRN on 13 Sept 2006.
The paper was published in the Winter 2006 issue of the Journal of Wealth Management.

© William W. Jennings 1999-2016