Despite the crisis on Wall Street and concerns about worsening commercial property fundamentals, many college endowments feel the current economic environment is a great time to invest in real estate.
"Endowments are somewhat contrarian – they see a downturn as a time when efficiencies are created and an opportunity," says Jimmy Hanson, president and CEO of The Hampshire Companies, a private real estate investment fund manager that works with several large endowments and foundations.
With their long-term investment horizon, endowments look beyond current market conditions and are less likely to make knee-jerk decisions regarding their investments. This strategy has served them well – for the past decade, university endowments have outperformed all the major financial indices, earning higher returns on their investments and beating most of their private and public investment fund counterparts.
The schools have increased their allocations to alternative investments, and in doing so, have invested more of their money in commercial real estate, either through real estate-specific funds, hedge funds, private equity or natural resources such as timber, according to the most recent endowment study from the National Association of College and University Business Officers (NACUBO), a non-profit professional organization representing chief administrative and financial officers at more than 2,100 colleges and universities across the country.
"There are more endowments today who are investing in alternative investments, especially commercial real estate," says Herman Bulls, president of Jones Lang LaSalle's public institutions group. He also serves as member of the board of directors for the U.S. Military Academy at West Point and helps manage the university's $150 million endowment.
"Before we just looked at stocks and bonds, but over the past few years we've opened up to hedge funds, private equity, real estate and even timber," Bulls explains. "Today, West Point has somewhere between 15 and 20 percent of its endowment allocated to alternative investments."
-- excerpted from Global Real Estate Monitor, October 2008
Monday, October 13, 2008
Friday, October 10, 2008
The Future's So Bright...
We're in the midst of unprecedented changes in our financial system. How will it all play out? Impossible to say in the short run.
First, the U.S. government is injecting a massive amount of money into the global financial system to stem the credit crisis. This should provide major support for stocks (although gloomy investor sentiment currently clouds this historically evident conculusion). That's a net positive. This federal intervention, while absolutely necessary, eventually will prove highly inflationary because the money will be created by more borrowing. This will increase the supply of dollars, so each dollar will be worth even less than it is now. This will make investments that beat inflation even more important over the next several years. Third, the huge asset sale by overleveraged financial institutions is gradually running its course but isn't over yet. This is a negative for financial assets now, but the result will be tremendous investment values for the companies that are buying these "good" assets for pennies on the dollar.
We've previously recommended, and continue to do so, that you keep the majority of your investment portfolios in a safer position. But you may want to consider taking advantage, modestly and gradually, of opportunities for higher income and low-risk growth. These types of investments include alternative investments that have been purchasing the ultra high-quality assets from the cash strapped banks for extremely favorable prices. The great thing about the alternative investments is that they are not volatile, provide a return you can spend (cash dividend) or reinvest, and are usually fully secured by the real properties they own.
If you want to beat the recent 10 year stock market averages, you should look into your alternatives to the stock and bond markets. The world's smartest and most conservative institutions have been using alternatives for years. Do your homework... you'll thank me later.
First, the U.S. government is injecting a massive amount of money into the global financial system to stem the credit crisis. This should provide major support for stocks (although gloomy investor sentiment currently clouds this historically evident conculusion). That's a net positive. This federal intervention, while absolutely necessary, eventually will prove highly inflationary because the money will be created by more borrowing. This will increase the supply of dollars, so each dollar will be worth even less than it is now. This will make investments that beat inflation even more important over the next several years. Third, the huge asset sale by overleveraged financial institutions is gradually running its course but isn't over yet. This is a negative for financial assets now, but the result will be tremendous investment values for the companies that are buying these "good" assets for pennies on the dollar.
We've previously recommended, and continue to do so, that you keep the majority of your investment portfolios in a safer position. But you may want to consider taking advantage, modestly and gradually, of opportunities for higher income and low-risk growth. These types of investments include alternative investments that have been purchasing the ultra high-quality assets from the cash strapped banks for extremely favorable prices. The great thing about the alternative investments is that they are not volatile, provide a return you can spend (cash dividend) or reinvest, and are usually fully secured by the real properties they own.
If you want to beat the recent 10 year stock market averages, you should look into your alternatives to the stock and bond markets. The world's smartest and most conservative institutions have been using alternatives for years. Do your homework... you'll thank me later.
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