I was looking at the following table from the Vanguard paper: Assessing endowment performance – the enduring role of low-cost investing.
I wondered how some of my momentum strategies( Simple ETF Momentum Strategy using 4 highly liquid asset classes and Momentum Strategy Using Stocks and Gold) and investing just in small cap value stocks fared against the performance of Harvard and Yale endowments. This is shown in the table below and the data can be seen in this spreadsheet. The data for returns is taken from Simba asset class returns from the Bogleheads website.
Returns upto June 2013 for Harvard, Yale, other endowments, active funds and 60/40 stock bond mix
Returns upto Dec 2013 for value and momentum strategies
|5 year||10 year||15 year||20 year||25 year|
|All active mutual funds||5.1||6||4.9||7||7.9|
|60/40 stock/bond index||5.9||7.4||5.7||7.6||8.3|
|Simple Momentum Strategy using 4 liquid asset classes||13.87||8.17||11.1||11.83||12.86|
|Momentum Strategy using Stocks and Gold||15.35||13||12.09||12.39||13.48|
- One can see clearly that the small cap value strategy and the momentum strategy outperforms endowments, active mutual funds and 60/40 stock bond mix.
- The Small Cap Value matches the Harvard endowment.
- The Momentum Strategies are right there near the top with the Yale Endowment.
- One should however remember that there was no easy way to execute the momentum strategies or small cap value strategy in the 1990s. However it shows the power of momentum and value in asset classes and that the outperformance of Yale and Harvard may have been due to better exposure to these risk factors.
For an individual investor, these are good strategies to adopt for the long-run. One should however be aware of costs, slippages and taxes.