How to Invest Like an Endowment

Timber has a low correlation to stocks and a track record of steady price appreciation over long periods of time. I believe in the concept so much that I have owned Plum Creek Timber (PCL Quote - Cramer on PCL - Stock Picks) for clients for years. Building on that idea, Claymore Securities will soon be bringing the Claymore Clear Global Timber ETF to the market. The ETF will own stocks, not the commodity.

Claymore Clear Global Timer, Plum Creek or any of the other commodity stocks and ETFs could be great long-term holds, but it is not the same thing as owning timberland in New Zealand, Sweden or anywhere else. Some of the effect is captured but not all.

Foreign assets of all kinds are important components in the portfolios of endowments and sovereign wealth funds. Again, I don't think the exact strategies they use can be perfectly replicated, but the exposure can be approximated. Rydex has eight single-country ETFs and Barclays has three exchange-traded notes for the most popular exchange rates. The single currency ETF that I think makes the most sense for diversification is the Rydex Australian Currency Shares (FXA Quote - Cramer on FXA - Stock Picks).

The simple case for Australia is that it is a commodity-based economy and its currency is therefore a better diversifier than with the euro or the British pound. Also, there's a lot less trade between Australia and U.S. than there is with Australia and Canada, which is also a commodity based economy. Furthermore, Australia is at the other end of the economic cycle than the U.S., meaning its GDP is growing faster than ours and the Reserve Bank of Australia is tightening, rather than loosening, monetary policy.

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