Follow Swensen's Yale Endowment Fund

I wrote about MVC Capital on Jan. 1 and while many names in the space like Apollo Investment Group AINV, KKR Financial KFN and the PowerShares Listed Private Equity Portfolio ETF PSP have been down 25% or more over the last year, MVC is only down 10%.

That may not be much consolation, and figuring out when this group turns around could be very difficult to do.

Real Assets

"Real assets" takes in a lot of different things that are easily accessed and not that difficult, relatively speaking, to understand.

The first thing that comes to mind is probably commodities. There is no shortage of precious metals, industrial metals, grains and other soft commodities to choose from in ETF or ETN form.

Real assets are intended to protect against inflation, so a part of this segment would also be inflation protected securities. Some of the more well-known products include the

• iShares Lehman TIPS Bond Fund TIP

• Vanguard Inflation Protected Securities Fund VIPSX

• StateStreet SPDR DB International Inflation Protected Bond ETF WIP; this one is very new.

I think the real-asset segment offers the most potential for innovative new products.

One example is the Macquarie Pastoral Fund, which invests in cattle and land -- mostly in Australia. It doesn't trade on an exchange, but is available to U.S. investors. The fund is only a year old, and if it does well, there will be other products isolating disparate investment niches. That will create more opportunity for do-it-yourselfers to create their own endowment fund.

Is this something that do-it-yourselfers, or for that matter professionals, should even attempt?

The short answer is -- not exactly.

A friend of mine likes to say that none of us are David Swensen, and none of us have access to his Rolodex.

Still, everyday folks can access market segments that they previously could not, and the exchange-traded versions of these segments will improve over time.

That will give us the ability to construct more-sophisticated, and hopefully better risk-adjusted, portfolios by adding in a few of these sorts of things.

I believe the approach that makes the most sense is to add in one or two items from real assets and absolute return as diversifiers for an equity-based portfolio -- as opposed to Yale, which appears (albeit very successfully) to use equities to diversify a global macro hedge fund.