Conclusion
If someone told me that I would have spent the better part of 2009 studying the history and theory of pension, endowment, and real money investing, I would surely have laughed out loud, as this was arguably one of the least interesting areas of finance. But as performance reports, warnings, and stories of illiquidity began leaking out of the Yales, Harvards, and CalPERS of the world, I became intrigued. The deeper I dug, the more fascinated yet terrified I became. Although the subject matter was of critical importance, few seemed to be asking hard questions—it was shocking. For example, a full year after the crash of ‘08, I posed a hypothetical question to the CIO of a large U.S. public pension fund, which had just lost billions and billions of dollars. I asked if he had known in advance how the fall of 2008 was going to unfold, what would he have done differently and what could he have done to protect the portfolio? He only replied, “Good question.”
As my research moved from arcane portfolio construction to uncertainties in the broader macroeconomy, I discovered linkages encompassing politics, society, philosophy, and history. I wanted to know why the extreme losses occurred, what lessons were learned, and what changes were being made. Instead of answers, I received only obfuscation and excuses: 2008 was impossible to predict; it was a perfect storm, a “black swan,” a fat tail. But rationalizations and references to relative performance neither fund budgets nor honor ...
