In this OIC-sponsored research study, Dr. Edward Szado, Associate Professor of Finance, Providence College School of Business researched historical returns for three hypothetical endowment portfolios based on the historical time series of average asset allocations of small (<$25 million), mid-sized ($100-500 million) and very large (>$1 billion) endowments reported in the NACUBO-Commonfund Study of Endowments.
In summary, the research showed that the QQQ and NDX buy-write and put spread collar overlays improved risk-adjusted performance for small, mid-sized and very large endowments, with the largest benefits occurring for the small endowment portfolio. While the return improvements were relatively small from an annualized return perspective, these improvements were averaged over a period of 18+ years so the cumulative impact is meaningful. Furthermore, the reductions in standard deviations and maximum drawdowns wee also economically significant.
Institutional investors can download the entire paper here. For study highlights, review the Executive Study.