WEST PALM BEACH, FL (HedgeCo.Net) – The California Institute of Technology (Caltech) said it would increase its hedge fund investments from its current 15% level to 25%. Caltech’s Treasurer and ChiefInvestment Officer, Sandra Ribovic Ell made such remarks during an interview in Milan, at the Italian Hedge Fund Conference. Ribovic also said the overall alternative investments of Caltech will beincreased to 60%, from its current 46% level.
Explaining the rationale for such decision, Ribovic said, “The stark reality is that we need to produce that revenue otherwise we will lose our competitive advantage in research�.” adding, “We needed to dampen the volatility of the endowment payment. Hedge funds cut off the tops and fill in the valleys.�
Caltech has shifted assets away from its traditional bond investment portfolios. In 1997, Caltech invested 60% of its total assets in equities, and 40% were devoted to bonds. During the recent bear market Caltech lost 20% of its assets in the equity and bond investments during a 12-month period, according to her.
Ribovic said the company had to move away from such investment philosophy, commenting further, “We recognized we had a lot of eggs in one basket, compared to our peers who were in alternatives like hedge funds, real estate, commodities, TIPS and timber … But the trustees were nervous because they saw hedge funds as too risky.” Caltech does not invest in fund of funds according to her, the reason being that many of the good funds are closed. Currently the Caltech portfolio has gained 6% year-to-date according to Ribovic, she manages about $2 billion in assets, of which $1.3 billion is in endowments. The endowment Investments contributes about 16 percent annually to the research budget of the science and engineering departments of the university.
Paul Oranika
Editor-in-Chief
HedgeCo.Net
Email: Editor@hedgeco.net
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