Experienced investors recognize that understanding the risk profile of the overall portfolio lies at the heart of any assessment of investment alternatives. Attempting to identify the risks to college endowment portfolios (on a scale of 1 to 5 with 1 being not very important and 5 very important), with reference to various aspects of portfolio risk (such as market risk, risk relative to benchmark, liquidity risk, fiduciary risk, and ‘other’ risk factors), provides clues to the risk framework within which colleges in Oxford and Cambridge invest. A majority (85%) of colleges consider their investment committees as being responsible for risk management of endowment assets, with about half reporting that the job is done internally without the assistance of any expert external guidance. The involvement of investment consultants in managing portfolio risk, is minimal. Even in Oxford, where more institutions reported using the services of investment consultants, only 15% of Colleges used a consultant in risk management.
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