How to Invest Like an Endowment

Here's the difference between owning these funds and what an endowment would do: If we buy streetTracks Gold Trust (GLD), we are making a passive investment in gold. But an endowment fund can hire a hedge fund or other manager with a successful active management strategy. More often than not, I might think the active strategy will have the better result, but you can participate in this investment theme to some extent.

A resource theme that does not get much attention in this context is uranium. Why uranium? There are 230 nuclear power plants in various stages of planning or construction. Each plant requires several hundred tonnes of uranium per year. Over the next decade, demand should increase substantially. There are plenty of mining stocks in the U.S., Canada and Australia but perhaps the purest exposure would be to simply buy shares in Uranium Participation Corp(URPTF).

What about wind power and something like Danish company Vestas Wind (VWDRY)? OK, you get the idea.

Another big asset class tht endowments and other big investors allocate money to is private equity. I just wrote about the new PowerShares International Listed Private Equity ETF (PFP). I do not believe that the ETFs in this space offer true private-equity exposure, but the companies in the funds are likely to benefit as they get hired by the various endowments and sovereign wealth funds to manage money. You are not accessing the pools of investment capital so much as benefiting from them.

The idea here is not that you should run out and buy all these themes, but simply that you should be aware they exist. You're unlikely to copy an endowment fund's strategy, but you can easily begin to capture a couple, just a couple, of similar effects for your portfolio. And let me be clear, I am convinced this is possible.

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