Great articles don’t always get the readership they deserve. We’ve posted the 10 most-widely read articles for the past year here. Below are another 10 that you might have missed, but I believe merit reading:
- Lessons from Yale’s Endowment Model and the Financial Crisis(by Geoff Considine) – April 20 – The devastation caused by the crash of 2008 was not limited to individual retirement portfolios. The endowments of most prominent universities suffered terribly, causing many of these institutions to drastically slash budgets and cut back planned capital spending. Yale may have the most respected investment acumen, but its performance during the 2008 crash was far from stellar, leading many to question the validity of the assumptions that underlie the endowment model. By constructing a portfolio that serves as a proxy for Yale’s and simulating it using Monte Carlo analysis, Considine showed that Yale’s performance was worse than what would be mathematically expected, but not significantly enough to question the endowment model’s tenets.
- Seth Klarman is More Worried than at Any Time in his Career (by Robert Huebscher) – May 25 – The concern that the dollars he earns for his clients will lose their purchasing power is always on hedge fund manager Seth Klarman’s mind. The possibility that the government will continue to print money to solve our economic problems has left him more worried than at any time in his career. “There are not enough dollars in the world to do that, unless we greatly debase them,” he said. As founder and president of the Boston-based Baupost Group, Klarman has compiled a track record of 20% annual returns over the last 28 years. Most remarkably, in only one year has he lost money.
- Flaws in Vanguard’s Withdrawal Strategy: Income versus Total-Return Portfolios (by Geoff Considine) – November 2, 2010 – Vanguard advertises that its mission is to simplify investors’ retirement decisions. In a recent study, however, it oversimplified the critical choices investors and their advisors face in constructing a portfolio for the withdrawal phase of retirement. This study glossed over a number of issues, some of which have a substantial bearing on its results. This article explored the issue of income versus total-return strategies in a manner consistent with the Vanguard study, but found that a total-return strategy does not enjoy an advantage over an income-oriented approach.
- Return Distributions and the Shiller P/E Ratio (by Keith C. Goddard) – February 2 – This article expanded on ideas developed by Joseph A. Tomlinson in a series of articles for Advisor Perspectives on the topic of the Shiller P/E Ratio as a predictor of future returns in the stock market. (See Advisor Perspectives: Shiller P/Es and Modeling Stock Market Returns, January 19, 2010.) Specifically, this article examined the distribution of three-year returns in the stock market following different starting points for the Shiller P/E ratio on a monthly basis since 1884 to illustrate that the historical distribution of rolling three-year returns in the stock market is not random.
