NOTES

INTRODUCTION

1.   David Swensen, “Letter to Fund Managers,” Yale Investments Office, October 2, 2020, https://static1.squarespace.com/static/55db7b87e4b0dca22fba2438/t/5f93366562f64e6fc88cab83/1603483237324/Manager+Diversity+and+Inclusion+Letter.pdf.

2.   Rose Horowitch, “Swensen Tells Money Managers to Increase Diversity if They Want to Work with Yale,” Yale News, October 27, 2020, https://yaledailynews.com/blog/2020/10/27/swensen-tells-money-managers-to-increase-diversity-if-they-want-to-work-with-yale/.

3.   “2020 Preqin Global Private Equity and Venture Capital Report,” Preqin, 2020, https://docs.preqin.com/samples/2020-Preqin-Global-Private-Equity-Venture-Capital-Report-Sample-Pages.pdf.

4.   https://www.preqin.com/insights/global-reports/2021-preqin-global-private-equity-and-venture-capital-report and https://www.barclayhedge.com/insider/fund-flow-indicator-august-2021.

CHAPTER 1

1.   Heather Long, “History of Charitable Endowment Giving,” Love to Know, accessed January 19, 2022, https://charity.lovetoknow.com/history-charitable-endowment-giving.

2.   “Glebe land,” Diocese of Gloucester, accessed June 20, 2022, https://www.gloucester.anglican.org/support-services/housing/glebe-land/. https://www.oxford.anglican.org/support-services/glebe-land/; Islamic Relief Worldwide, “WAQF (Endowment),” Islamic Relief Worldwide, accessed January 19, 2022, https://www.islamic-relief.org/category/strategic-business-units/islamic-social-finance-strategic-business-units/waqf-endowment/.

3.   David Chambers, Elroy Dimson, and Justin Foo, “Keynes, Kings and Endowment Asset Management,” National Bureau of Economic Research, Working Paper 20421 (2014)

4.   National Association of College and University Business Officers, “NACUBO-TIAA Study of Endowments: Summary Results and Key Insights (2019).”

5.   US Department of Education, “National Center for Education Statistics, 2021,” US Department of Education, 2021, https://nces.ed.gov/fastfacts/display.asp?id=73.

6.   National Association of College and University Business Officers, “NACUBO-TIAA Study of Endowments (2018).”

7.   Harvard University, “Financial Report Fiscal Year 2021,” Harvard University, 2021, https://finance.harvard.edu/files/fad/files/fy21_harvard_financial_report.pdf.

8.   National Association of College and University Business Officers, “NACUBO-TIAA Study of Endowments: Summary Results and Key Insights (2019).”

9.   Seth Alexander, and Ahron Herring, “Endowment Spending Policy at MIT,” MIT Faculty Newsletter, May/June 2008, https://web.mit.edu/fnl/volume/205/alexander_herring.html.

10.   Foreword to the book by David Swensen, Pioneering Portfolio Management: An Unconventional Approach to Institutional Investment (New York: Free Press, 2009).

11.   For a more in-depth discussion, see Chapter 12 on due diligence.

12.   Nikolay Shevchenko, “Did Reagan Really Coin the Term ‘Trust but Verify,’ a proverb revived by HBO’s Chernobyl?” Russia Beyond, June 17, 2019, https://www.rbth.com/lifestyle/330521-reagan-trust-but-verify-chernobyl/.

13.   Quote Investigator, accessed on November 18, 2021, https://quoteinvestigator.com/2011/07/22/keynes-change-mind/.

14.   Most states have adopted UPMIFA or a modified version of the UPMIFA. Elaborating on the differences is beyond the purview and scope of this book. Please seek the advice of a regulatory authority or your legal counsel to understand the differences.

15.   See “Spending Policies” section on page 7 for more details.

16.   Andrew Carnegie, “The Gospel of Wealth,” Carnegie Corporation of New York, accessed January 25, 2022, https://www.carnegie.org/about/our-history/gospelofwealth/.

17.   “1969 Annual Report,” Ford Foundation, December 31, 1969, https://www.fordfoundation.org/about/library/annual-reports/1969-annual-report/.

18.   “Management of Institutional Funds Act,” Uniform Law Commission, accessed November 18, 2021, https://www.uniformlaws.org/committees/community-home?CommunityKey=63a66841-533c-419d-8b26-82152512c14f.

19.   “Private Foundations,” Cause IQ, accessed January 25, 2022, https://www.causeiq.com/directory/private-foundations-list/.

20.   “Trustee Compensation: Should Your Foundation Pay?” GMA Foundations, accessed November 18, 2021, https://www.gmafoundations.com/trustee-compensation-private-foundation/.

21.   See “Endowment Structure and Staffing” and “Asset Allocation and Manager Selection” in the Endowments section (pages XX–XX), as foundations have similar practices.

22.   “Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA Patriot Act) Act of 2001,” US Congress, October 26, 2001, https://www.congress.gov/107/plaws/publ56/PLAW-107publ56.pdf.

23.   “The Financial Action Task Force,” Financial Crimes Enforcement Network, accessed November 18, 2021, https://www.fincen.gov/resources/international/financial-action-task-force.

24.   David Moore and Douglas Rutzen, “Double Issue: Global Philanthropy,” International Center for Not-For-Profit Law, April 2011, https://www.icnl.org/resources/research/ijnl/legal-framework-for-global-philanthropy-barriers-and-opportunities.

25.   The 1 percent rate is applicable only in the year in which spending exceeds the prior 5-year average spend.

26.   “Program-Related Investments,” IRS, accessed November 18, 2021, https://www.irs.gov/charities-non-profits/private-foundations/program-related-investments.

CHAPTER 2

1.   Vauhini Vara, “The Real Reason for Pensions,” New Yorker, December 4, 2013, https://www.newyorker.com/business/currency/the-real-reason-for-pensions.

2.   “A Timeline of the Evolution of Retirement in the United States,” Georgetown University Law Center, 2010, https://scholarship.law.georgetown.edu/cgi/viewcontent.cgi?article=1049&context=legal

3.   “A Timeline of the Evolution of Retirement in the United States.”

4.   “A Timeline of the Evolution of Retirement in the United States.”

5.   Melissa Phipps, “The History of Pension Plans in the U.S,” The Balance, October 14, 2021, https://www.thebalance.com/the-history-of-the-pension-plan-2894374

6.   “Employee Benefits Security Administration, Private Pension Plan Bulletin Historical Tables and Graphs 1975–2019,” US Department of Labor, September 2021, https://www.dol.gov/sites/dolgov/files/ebsa/researchers/statistics/retirement-bulletins/private-pension-plan-bulletin-historical-tables-and-graphs.pdf

7.   “Global Pension Assets Study,” Thinking Ahead Institute, September 7, 2021, https://www.willistowerswatson.com/en-US/News/2021/09/top-pension-fund-assets-rise-strongly-despite-pandemic-uncertainty.

8.   “Top 100 Largest Corporate Pension Rankings by Total Assets,” Sovereign Wealth Fund Institute, accessed on January 19, 2022, https://www.swfinstitute.org/fund-rankings/corporate-pension.

9.   Final average salary, which is either the average of the highest annual earnings for a set number of years (usually 3 to 5 years) or the average salary during the final years (3 to 5 years, again) of service.

10.   “NASRA Issue Brief: Public Pension Plan Investment Return Assumptions,” National Association of State Retirement Administrators, last modified February 2021, https://www.nasra.org/files/Issue%20Briefs/NASRAInvReturnAssumptBrief.pdf.

11.   “NASRA Issue Brief.”

12.   “NASRA Issue Brief.”

13.   Amy Whyte, “Public Pensions Pour More Money into Private Equity,” Institutional Investor, January 31, 2019, https://www.institutionalinvestor.com/article/b1cy61jsl24097/Public-Pensions-Pour-More-Money-Into-Private-Equity.

14.   Jean-Pierre Aubry and Caroline V. Crawford, “Impact of Public Sector Assumed Returns on Investment Choices,” Center for Retirement Research at Boston College, State and Local Pension Plans no. 63 (2019), https://crr.bc.edu/wp-content/uploads/2019/01/SLP_63-1.pdf.

15.   “Investment Company Fact Book, 59th edition,” 2019, https://www.ici.org/system/files/attachments/pdf/2019_factbook.pdf.

16.   2020–21 Annual Comprehensive Financial Report, calpers.ca.gov, accessed March 15, 2022, https://www.calpers.ca.gov/docs/board-agendas/202111/financeadmin/item-7a-03_a.pdf.

17.   Release: Quarterly Retirement Market Data, Third Quarter 2021, Investment Company Institute, December 16, 2021, https://www.ici.org/statistical-report/ret_21_q3

18.   Please see the discussion on endowments in Chapter 1 for a detailed explanation.

19.   N. Raymond and D. Ingram, “N.Y. Pension Fund Manager, Brokers Charged in Pay-to-Play Scheme,” Reuters, December 21, 2016, https://www.reuters.com/article/us-new-york-corruption-pensionfund/n-y-pension-fund-manager-brokers-charged-in-pay-to-play-scheme-idUSKBN14A1M3.

20.   “Employment Retirement Income Security Act (ERISA),” US Department of Labor, accessed on August 16, 2019, https://www.dol.gov/general/topic/retirement/erisa.

CHAPTER 3

1.   James Beech, “Global Family Office Growth Soars, Manages $5.9 Trillion,” Campden Research, July 19, 2019, https://www.campdenfb.com/article/global-family-office-growth-soars-manages-59-trillion.

2.   “The Global Family Office Report,” UBS, 2019, https://www.ubs.com/global/en/wealth-management/uhnw/global-family-office-report/global-family-office-report-2019.html.

3.   “The Global Family Office Report.”

4.   “The 2020 Global Family Office Report,” UBS and Campden Research, 2020, https://hkifoa.com/wp-content/uploads/2021/05/ubs-global-family-office-report-2020.pdf.

5.   “The 2020 Global Family Office Report.”

6.   “The 2021 Global Family Office Report,” UBS, 2021, https://www.ubs.com/global/en/global-family-office/reports/gfo-r-21-4-client.html.

7.   “The 2020 Global Family Office Report,” UBS, 2020, https://hkifoa.com/wp-content/uploads/2021/05/ubs-global-family-office-report-2020.pdf.

8.   “The 2020 Global Family Office Report.”

CHAPTER 4

1.   Adrian Blundell-Wignall, Yu-Wei Hu, and Juan Yermo, “Sovereign Wealth and Pension Fund Issues,” OECD Working Papers on Insurance and Private Pensions, no. 14 (2008).

2.   Appendix 3 Sovereign Wealth Funds—US Department of the Treasury, accessed March 20, 2022, https://home.treasury.gov/system/files/206/2007_Appendix-3.pdf.

3.   “We Are the World’s First Sovereign Wealth Fund,” Kuwait Investment Authority, accessed January 20, 2022, https://kia.gov.kw/about-kia/#maindate.

4.   “Kiribati’s Revenue Equalization Reserve Fund,” PitchBook.com, accessed January 20, 2022, https://pitchbook.com/profiles/limited-partner/52324-93#overview.

5.   “History,” New Mexico State Investment Council, accessed December 4, 2021, https://www.sic.state.nm.us/about-the-sic/history/.

6.   “Government of Singapore Investment Corporation Is Formed,” Government of Singapore, last updated August 2019, https://eresources.nlb.gov.sg/history/events/13ca991b-fef6-4f87-a95a-40d360a66faa.

7.   Diego Lopez and Daniel Brett, “Global SWF Annual Report,” Global SWF, 2021, http://investmentnews.co.nz/wp-content/uploads/3-SWF-Annual-Report.pdf.

8.   “Sovereign Wealth Funds Surpass $9 Trillion in Assets,” Sovereign Wealth Fund Institute, September 9, 2021, https://www.swfinstitute.org/news/88265/sovereign-wealth-funds-surpass-9-trillion-in-assets.

9.   Crude Oil Prices—70 Year Historical Chart, Macrotrends.com, accessed March 28, 2022, https://www.macrotrends.net/1369/crude-oil-price-history-chart.

10.   H. Raymond, “Sovereign Wealth Funds as Domestic Investors of Last Resort During Crises,” Économie Internationale, no. 123 (2010), 121–159, https://doi.org/10.3917/ecoi.123.0121.

11.   “Sovereign Wealth Funds: IMF Global Financial Stability Report,” International Monetary Fund, accessed December 4, 2021, https://www.imf.org/external/pubs/ft/gfsr/2007/02/pdf/annex12.pdf.

12.   Christine Ebrahimzadeh, “Dutch Disease: Wealth Managed Wisely,” International Monetary Fund, last updated February 24, 2020, https://www.imf.org/external/pubs/ft/fandd/basics/dutch.htm.

13.   State Street Global Advisors, Sovereign Investment Trends, January 2018 and January 2020.

14.   “Know Your Investor: Hedge Funds,” ALTS Capital, 2019, https://www.altscapital.com/know-your-investor.

15.   “Sovereign Wealth Funds in Motion,” Preqin, May 2021

16.   Christine Ebrahimzadeh, “Dutch Disease: Wealth Managed Wisely,” International Monetary Fund, last updated February 24, 2020, https://www.imf.org/external/pubs/ft/fandd/basics/dutch.htm.

17.   “Linaburg-Maduell Transparency Index (LMTI),” Sovereign Wealth Fund Institute, accessed December 4, 2021, https://www.swfinstitute.org/research/linaburg-maduell-transparency-index.

18.   “Sovereign Wealth Funds Generally Accepted Principles and Practices ‘Santiago Principles’,” International Working Group of Sovereign Wealth Funds, October 2008, https://www.ifswf.org/sites/default/files/santiagoprinciples_0_0.pdf.

CHAPTER 5

1.   “Insights Global Macro Trends: Dream Big,” KKR, October 2021, https://www.kkr.com/sites/default/files/Dream_Big_20211006.pdf.

2.   “Facts + Statistics: Industry Overview,” Insurance Information Institute, accessed December 6, 2021, https://www.iii.org/fact-statistic/facts-statistics-industry-overview.

3.   “Insights Global Macro Trends: Dream Big,” KKR, October 2021, https://www.kkr.com/sites/default/files/Dream_Big_20211006.pdf.

4.   “Natixis Insurance Survey: Rates, Liabilities and Regulation Put CIOs Between a Rock and a Hard Place,” Natixis, November 25, 2019, https://www.im.natixis.com/us/research/insurance-survey-2019-regulatory-challenges.

5.   “Insurance Markets in Figures,” OECD, June 2021, https://www.oecd.org/daf/fin/insurance/Insurance-Markets-in-Figures-2021.pdf.

6.   “Preqin Special Report: Private Equity Funds of Funds,” Preqin, November 2017, https://docs.preqin.com/reports/Preqin-Special-Report-Private-Equity-Funds-of-Funds-November-2017.pdf.

7.   Robert S. Harris, Tim Jenkinson, Steven Neil Kaplan, and Rüdiger Stucke, “Financial Intermediation in Private Equity: How Well Do Funds of Funds Perform?” Darden Business School, Working Paper No. 2620582 (2017).

8.   Lawrence Calcano, Eileen Duff, Hannah Shaw Grove, John Imbriglia, Peter Montgomery, Ryan Van Geons, Dan Vene, and Nick Veronis, “Registered Investment Advisors and Private Equity,” iCapital Network, June 2016, https://s3.amazonaws.com/icn-web/RIA_Whitepaper_RGB_060716_A.pdf.

9.   “2020 RIA Sentiment Survey,” TD Ameritrade Institutional, January 7, 2020, https://www.tdainstitutional.com/content/dam/institutional/resources/ria-sentiment-survey/presentation_2020_RIA_sentiment_survey_7Jan2020_1271014.pdf.

10.   “Registered Investment Advisors and Private Equity.”

11.   See Chapter 15, Technology in Alternatives Markets for a discussion on the technological advances to simplify subscriptions and processes.

12.   Discussion on the characteristics and differences of these fund structures are beyond the scope of this discussion other than to state that they are essentially unlisted closed-end funds organized under the Investment Company Act of 1940 that allows investment into illiquid strategies. A good discussion is available at https://www.ultimusfundsolutions.com/the-need-for-yield-why-should-asset-managers-consider-launching-an-interval-or-tender-offer-fund-and-what-do-they-need-to-know/.

13.   “Registered Investment Advisor (‘RIA’) Private Real Estate Survey,” MLG Capital, accessed January 21, 2022, https://mlgcapital.com/news/registered-investment-advisor-private-real-estate-survey/.

CHAPTER 6

1.   “ILPA Principles 3.0 (2019),” Institutional Limited Partners Association, accessed December 15, 2021, https://ilpa.org/ilpa-principles/.

CHAPTER 7

1.   “First-Time Fund Managers,” Preqin, February 2017, https://docs.preqin.com/newsletters/pe/Preqin-Private-Equity-and-Venture-Capital-Spotlight-February-2017.pdf.

2.   “First-Time Funds in Emerging Markets,” Global Private Capital Association, July 31, 2015, https://www.empea.org/research/empea-brief-first-time-funds-in-emerging-markets/.

CHAPTER 9

1.   For a good discussion on benchmarks, please see CFA U.K.’s research and position paper at https://www.cfauk.org/-/media/files/pdf/pdf/5-professionalism/3-research-and-position-papers/benchmarks-and-indices.pdf.

CHAPTER 11

1.   Amy Gallo, “The Value of Keeping the Right Customers,” Harvard Business Review, 2014, https://hbr.org/2014/10/the-value-of-keeping-the-right-customers.

CHAPTER 12

1.   “Due Diligence Questionnaire and Diversity Metrics Template,” Institutional Limited Partners Association, accessed December 9, 2020, https://ilpa.org/due-diligence-questionnaire/.

2.   “Due Diligence Questionnaires,” Alternative Investment Management Association, accessed December 9, 2020, https://www.aima.org/sound-practices/due-diligence-questionnaires.html#?active=tab-ddq-for-investors.

3.   “Sound Practices for Hedge Fund Managers,” Appendix II, Managed Funds Association, accessed December 9, 2020, https://www.managedfunds.org/wp-content/uploads/2011/06/Final_2009_complete.pdf.

4.   See Appendix 1 for a sample of the documents that are made available in a typical PE data room.

5.   The data rooms of old are physical storage areas for confidential documents kept in the manager’s office. Today, all data rooms are online platforms, although some managers might still have a couple of documents they would show only in person.

6.   SEC.gov, accessed April 4, 2022, https://www.sec.gov/rules/final/2011/ia-3221-appc.pdf.

7.   Chris Kundro, “The problem When Asset Allocators Don’t Manage and Mitigate Operational Risks in Multi-Fund Portfolios,” SS&C Technologies Inc., November 13, 2019, https://www.ssctech.com/blog/the-problem-when-asset-allocators-dont-manage-and-mitigate-operational-risks-in-multi-fund-portfolios-1.

CHAPTER 13

1.   John Nofsinger, “Familiarity Bias Part 1: What Is It?” Psychology Today, July 25, 2008, https://www.psychologytoday.com/us/blog/mind-my-money/200807/familiarity-bias-part-i-what-is-it.

2.   Gur Huberman, “Familiarity Breeds Investment,” Review of Financial Studies 14, no. 3, Fall 2001, 659–680, http://rfs.oxfordjournals.org/.

CHAPTER 14

1.   “Private Fund Strategies Report,” PitchBook.com, accessed January 15, 2022, https://pitchbook.com/news/reports/q3-2021-private-fund-strategies-report.

2.   “First Time Funds,” Morse, January 16, 2018, https://www.morse.law/news/first-time-funds/.

3.   “Westbridge Team Splits from Sequoia India; to Focus on Public Equity.” VC Circle, January 18, 2021, https://www.vccircle.com/westbridge-team-splits-sequoia-india-focus-public-equity.

CHAPTER 17

1.   “Women in Private Equity,” Preqin, 2019, https://docs.preqin.com/reports/Preqin-Women-in-Private-Equity-February-2019.pdf.

2.   “QuickFacts: United States,” US Census Bureau, accessed February 10, 2022, https://www.census.gov/quickfacts/US.

3.   Paul Gompers, Silpa Kovvali, “The Other Diversity Dividend,” Harvard Business Review, July 9, 2018, https://hbr.org/2018/07/the-other-diversity-dividend

4.   Alan Mirabella, “Hedge Funds Run by Women, Minorities Outperform Market Peers,” Bloomberg, November 8, 2021, https://www.bloomberg.com/news/articles/2021-11-08/hedge-funds-run-by-women-minorities-outperform-market-peers.

5.   “Diversity,” DUMAC Inc., accessed February 10, 2022, https://dumac.duke.edu/diversity/.

6.   “The Rooney Rule,” NFL, accessed February 10, 2022, https://operations.nfl.com/inside-football-ops/diversity-inclusion/the-rooney-rule/.