The Difference Simple Alternatives Can Make – 15 for 15
Two roads diverged in a wood, and I
I took the one less traveled by,
And that has made all the difference.
– Robert Frost
Many investors seem to be rushing down the same road – one paved with more and more presentations touting an expanding array of so-called alternative investments. From hedge funds and private equity to private credit and venture capital, the pressure to increase complexity is rising.
But what if that road, while well-traveled by large investors, isn’t the only, or possibly best, way to achieve top results – top results that are more consistent?
The Road Less Traveled
After decades at large firms in senior roles, often selling complexity ourselves, we started Fiduciary Wealth Partners to take a different path. One grounded in Transparency, Simplicity, and Peace of Mind ®.
We stepped away from the industry’s conventional wisdom favoring frequent tactical shifts and complex investment strategies, instead consistently asking and testing…
Should we work harder on keeping it simple?
Our answer, every time we evaluate different options and analyze the results, is…
Yes.
Why We’re More Direct Than Ever – Simple is Superior
We’ve long tracked the way that simplicity stacks up against complexity – specifically, how a straightforward, Simple Global Index Portfolio has performed compared to what many believe to be the most well-resourced and connected investors in the world – top endowments such as Yale, Stanford, Harvard, MIT, etc.
As we detail at the bottom of this post, the index only portfolio we’ve constructed for these comparisons is hypothetical, but it could not be simpler, if disciplined, for any investor to construct and manage. It consists of just five Vanguard Index Funds, allocated in a manner that strives to match the macro allocations of US endowments, rebalanced once a year back to targets on January 1.
In comparing the Simple Global Index Portfolio’s long-term performance to what some would say are the best of the best – top quartile endowments – its record is…
15 for 15
Despite pronouncements that “life can be better” after allocating more to alternative investments and that “we need private equity, we need more of it, and we need it now…”
The Simple Global Portfolio has ranked at the top – 15 out of 15 rolling 10-year periods in a row – see the results below.
Sources: MPI Stylus software, Morningstar, and NACUBO-TIAA 2024 Study of Endowments. See Important Disclosures at the end of this post.
Let That Sink In
A simple globally diversified portfolio of low-cost index funds with…
No leverage.
No illiquidity.
No lockups.
No forecasting.
No tactical shifts.
No special access.
No high fees.
Simply outpacing 75% of large, sophisticated institutional investors – ones run by top investment teams with exclusive access to leading investment consultants, managers and funds – time in and time out. Outperformance as compared to the best, spanning 25 years that include the dot com bust, the Great Financial Crisis, COVID and many other up and down-market periods.
Simple Alternatives and Peace of Mind
With the narrative continuing to grow that investors aren’t being good fiduciaries if they don’t place more assets into new complex, exclusive strategies…
Comments that can increase fears of missing out if you don’t have access to private funds…
We encourage investors to consider another path.
One that is focused on keeping it simple. One that is fully transparent, easy to understand, and implement.
A Simple Alternative that has made a difference by delivering consistent top returns.
Related Reading
The Demise of Alternative Investments – Richard Ennis, CFA
What Needs to Change? – Tommi Johnsen, PhD
Should We Be Tactical? – Elisabetta Basilico, PhD, CFA
Elusive Alpha, Corrosive Costs – Richard Ennis, CFA
Are Selectors Good at Selecting? – Elisabetta Basilico, PhD, CFA
The Certain Drag on Performance – Preston McSwain
Are Alternative Funds Prudent for Taxable Investors? – Preston McSwain – Trust and Estates Journal
Important Disclosures:
This analysis is provided for informational purposes only and does not reflect an endorsement or recommendation by FWP and should not be regarded as an offer to sell or as a solicitation of an offer to buy the securities or other instruments or portfolios mentioned in it. This analysis specifically should not be used for making investment decisions. Investors are advised to consult their own financial professionals for advice on asset allocation and the selection of funds. For more information on the use of this analysis, please visit https://fwpwealth.com/disclosures-and-social-media/
The Simple Global Index Portfolio (SGP) portfolio is not an actual fund, index, portfolio, or security. The following are the SGP asset mixes of the over various time-periods:
SGP allocations represent the mixes of the funds shown above over each 10-year period illustrated in the Top Quartile Endowments vs. Simple Global Index Fund Portfolio performance comparison chart. As an example, the 2021-2024 asset mix represents the fund allocations used for a period that spans rolling ten-year periods that start in 2010. The prior 2010-2020 asset mix represents 10-year rolling periods that start in 2000.
The performance of the endowments was based on data as reported by the National Association of College and University Business Officers that can be found at the link below.
2024 NACUBO-Commonfund Study of Endowments
The returns of the SGP are based on the historical results of actual Vanguard index funds (as calculated by MPI software using data feeds from Morningstar) re-balanced back to conform with the allocations illustrated above once a year on January 1st. SGP returns also assume reinvestment of all distributions at NAV, the deduction of fund expenses, and 10-year returns are annualized.
Both the NACUBO Endowment returns and SGP would be lower if third-party consulting and advisory fees were applied. To the extent that such fees were greater or less for NACUBO or SGP, such fees would alter the comparative results. Actual returns might differ, and future returns may be higher or lower. Importantly, the SGP does not reflect an actual investor portfolio.
According to NACUBO, the approximate allocations of endowments have been trending higher over the last 10 years or more. The comparison of the SGP portfolio returns to the NACUBO Index of Top Quartile Endowment returns may not be an apples-to-apples representation, however, and this presentation should not be relied upon to make any investment decisions. For more information on historical endowment allocation targets and performance, please refer to the NACUBO link above.
Past performance does not guarantee or indicate future results.
All data and return calculations are from third-party sources mentioned below under Return Data Sources. Fiduciary Wealth Partners, LLC does not guarantee the accuracy of any data in this presentation and does not take responsibility for reliance on it. All data and opinions are subject to change at any time.
Return Data Sources: NACUBO-Commonfund Study of Endowments and Foundations (NCSE), Morningstar and MPI Software.
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