This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Using an ETF Portfolio to Mimic an Endowment Portfolio

Like most endowment-style portfolios there is an allocation to inflation assets. This shows up in some places as "real return" or "inflation protected" and is comprised of commodities and TIPS bonds.

These segments are, of course, easily captured with funds like the PowerShares DB Commodity Index Tracking Fund (DBC) and the iShares Barclays TIPS Bond Fund (TIP). In the tailing 12 months DBC is down 11% while TIP is up 9%. This segment was up 0.1% for CalPERS, implying it had exposure to both segments.

The final category reported was "absolute return," which was down 0.2%. There are many funds offering access to this segment, usually in the form of long-short funds. The PowerShares DB G10 Currency Harvest Portfolio (DBV) is down 0.1% for the same time period, which is obviously very close to the CalPERS return, but the WisdomTree Managed Futures Fund (WDTI)was down a shocking 20%.

For most individual investors, managing nine different asset classes is going to be a lot of work to achieve a 1.7% return (the result of the benchmark, not what CalPERS earned). But there is value in studying the portfolio to see how the managers of a $200 billion investment fund believe that volatility can be dampened, and how correlations can blend together to seek a desired risk-adjusted result.

Just keep in mind that some of the categories are not easily captured in exchange-traded products. For instance, a timber ETF might be a good purchase at a given point in the cycle, but it will probably have a higher correlation to equities than a stand of trees in Canada or New Zealand that a fund like CalPERS might own.

At the time of publication, clients of the author's firm held EMIF and TIP.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
3 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
ICF $89.01 1.10%
CUT $19.76 1.60%
ACWI $50.40 1.80%
AGG $109.74 -0.30%
PSP $8.98 2.40%


Chart of I:DJI
DOW 15,973.84 +313.66 2.00%
S&P 500 1,864.78 +35.70 1.95%
NASDAQ 4,337.5120 +70.6750 1.66%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs