Is the Endowment Model Broken? - Triple digit moves

Of the past 11 trading days, 10 (including today) have had triple digit moves, making this one of the most volatile times in history for the market. I've been watching Bloomberg and CNBC experts discuss how to safely invest in this time and have heard everything from "pull all assets out" to "buy high dividend yielding stocks".

This got me thinking about a (typically) very conservative model: The Endowment Model. Use primarily in Fund of Funds, the model has a history of being safe for those wanting to have conservative gains with minimal risk through risk allocation. Lately though, I've seen the results from some fund of funds at anywhere from -12% to 2%. It's bad when a 2% gain is putting you in the top echelon of firms.

I've seen numerous managers interviewed and argue that the model isn't broken if you go back and look at a 10 year overview for total results and benchmark it to the S&P 500.

Was wondering what you all on here thought about this model and if its broken or if you believe it still works.

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Oct 10, 2011