Odds and Ends

I meant to get to this earlier but Harvard Management Company’s 13F was recently made public, listing the holdings of the small portion of the endowment managed in-house with exchange trade securities. There is rarely upheaval in the holdings but it is constructive to see what’s what. As is always the case the fund is very heavy in emerging markets. The largest holdings appear to be iShares Brazil (EWZ) by a wide margin followed by iShares FTSE/Xinhua China 25 (FXI) with those two adding up to almost one third of the portfolio. Much of the portfolio is a who’s who of emerging market ETFs but there are also plenty of individual stocks in the portfolio but those positions seem to be much smaller with largest stock holding appearing to be a REIT called Pebblebrook Hotel Trust (PEB). The market cap is $809 million and HMC’s position is worth $46 million. The yield is low and it has underperformed the S&P 500 by a wide margin in the last year (it’s time on the market). On another note Market Vectors has filed for an Andean fund that will focus on small and mid cap stocks. The countries will be Chile, Peru and Colombia. The mention in the filing, and the IU article of small and mid cap might be because the large companies in these markets are mid caps by US standards but that was not clear from my skimming of filing. There was also a mention in the filing, as there always is, warning of industry concentration which is only a problem when fund holders don’t realize the industry...

Odds and Ends

I meant to get to this earlier but Harvard Management Company’s 13F was recently made public, listing the holdings of the small portion of the endowment managed in-house with exchange trade securities. There is rarely upheaval in the holdings but it is constructive to see what’s what. As is always the case the fund is very heavy in emerging markets. The largest holdings appear to be iShares Brazil (EWZ) by a wide margin followed by iShares FTSE/Xinhua China 25 (FXI) with those two adding up to almost one third of the portfolio. Much of the portfolio is a who’s who of emerging market ETFs but there are also plenty of individual stocks in the portfolio but those positions seem to be much smaller with largest stock holding appearing to be a REIT called Pebblebrook Hotel Trust (PEB). The market cap is $809 million and HMC’s position is worth $46 million. The yield is low and it has underperformed the S&P 500 by a wide margin in the last year (it’s time on the market). On another note Market Vectors has filed for an Andean fund that will focus on small and mid cap stocks. The countries will be Chile, Peru and Colombia. The mention in the filing, and the IU article of small and mid cap might be because the large companies in these markets are mid caps by US standards but that was not clear from my skimming of filing. There was also a mention in the filing, as there always is, warning of industry concentration which is only a problem when fund holders don’t realize the industry...

Alaska Permanent Fund

Over the years I’ve written a few times about the Alaska Permanent Fund (APF) which is akin to a sovereign wealth fund that pays the annual dividend to Alaska residents. Generally I’ve not been too flattering to the fund for performance issues and benchmark switching. Slightly bigger picture I think they overreact to the short term but do so without a solid strategy for the long term. The latest bit of news comes via IndexUniverse that the Alaska Permanent Fund is going to put $1 billion (out of $36 billion total) into the FTSE RAFI US 1000 index. This index has of course been available in an ETF from PowerShares with symbol PRF for almost five years. The idea is that companies are weighted by four fundamental factors not market cap which tends to reward momentum as opposed to value. Before the fund debuted the back test was solid and since PRF started trading it has been up 2.4% versus a decline 8.7% for the S&P 500. The outperformance is meaningful but I would also note the correlation to the S&P 500 is very high; per ETFreplay it has been between 0.94 and 1.00 for the last two years. The value bias did not help much during the worst of the panic as the fund was very heavy in financials (I believe more so than the SPX) and today has 20.78 in financials. From the October 2007 peak to March 2009 low PRF actually dropped more than the S&P 500. The APF has an unusual target asset allocation; Company Exposure 53%Special Opportunities 21%Real Assets 18%Interest Rates 6%Cash 2% Company...

Alaska Permanent Fund

Over the years I’ve written a few times about the Alaska Permanent Fund (APF) which is akin to a sovereign wealth fund that pays the annual dividend to Alaska residents. Generally I’ve not been too flattering to the fund for performance issues and benchmark switching. Slightly bigger picture I think they overreact to the short term but do so without a solid strategy for the long term. The latest bit of news comes via IndexUniverse that the Alaska Permanent Fund is going to put $1 billion (out of $36 billion total) into the FTSE RAFI US 1000 index. This index has of course been available in an ETF from PowerShares with symbol PRF for almost five years. The idea is that companies are weighted by four fundamental factors not market cap which tends to reward momentum as opposed to value. Before the fund debuted the back test was solid and since PRF started trading it has been up 2.4% versus a decline 8.7% for the S&P 500. The outperformance is meaningful but I would also note the correlation to the S&P 500 is very high; per ETFreplay it has been between 0.94 and 1.00 for the last two years. The value bias did not help much during the worst of the panic as the fund was very heavy in financials (I believe more so than the SPX) and today has 20.78 in financials. From the October 2007 peak to March 2009 low PRF actually dropped more than the S&P 500. The APF has an unusual target asset allocation; Company Exposure 53%Special Opportunities 21%Real Assets 18%Interest Rates 6%Cash 2% Company...

The Big Picture for the Week of April 11, 2010

We are on our way home today after a great time in Vancouver. This is a must visit destination. Yesterday in the FT Gillian Tett had an article about the Government Investment Corp (GIC) of Singapore which is a sovereign wealth fund. The article had a few quotes from GIC officials questioning the Harvard and Yale models for portfolio construction. Keeping tabs on these makes for fun reading but I believe is also very constructive for learning. My take all along has been that it makes no sense to try to copy what the endowments do but they can influence a portfolio. For example I find it noteworthy when they make changes to how much they have in “real assets.” I am not a fan of 25-30% in real assets for any retail type portfolio but when Harvard or Yale, for example, goes from 20% to 30% in real assets (or some other large change) they are clearly expressing an opinion about something. Allowing that to influence you in going from 2% to 4% or some other change that would not involve you betting the house is reasonable. A few times in the past I’ve mentioned Jack Meyer’s (former HMC CEO) influence on me in keeping Plum Creek Timber (PCL) for quite a few years. Generally it was a good hold most of the time (not 100% of the time of course) and while I did sell it a while back the influence was clear. While I believe in the concept of timberland’s low correlation it is very difficult to capture in a stock or ETF I find it...

The Big Picture for the Week of April 11, 2010

We are on our way home today after a great time in Vancouver. This is a must visit destination. Yesterday in the FT Gillian Tett had an article about the Government Investment Corp (GIC) of Singapore which is a sovereign wealth fund. The article had a few quotes from GIC officials questioning the Harvard and Yale models for portfolio construction. Keeping tabs on these makes for fun reading but I believe is also very constructive for learning. My take all along has been that it makes no sense to try to copy what the endowments do but they can influence a portfolio. For example I find it noteworthy when they make changes to how much they have in “real assets.” I am not a fan of 25-30% in real assets for any retail type portfolio but when Harvard or Yale, for example, goes from 20% to 30% in real assets (or some other large change) they are clearly expressing an opinion about something. Allowing that to influence you in going from 2% to 4% or some other change that would not involve you betting the house is reasonable. A few times in the past I’ve mentioned Jack Meyer’s (former HMC CEO) influence on me in keeping Plum Creek Timber (PCL) for quite a few years. Generally it was a good hold most of the time (not 100% of the time of course) and while I did sell it a while back the influence was clear. While I believe in the concept of timberland’s low correlation it is very difficult to capture in a stock or ETF I find it...