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The most commonly allocated hedge funds in 1999 (in order) were Tiger Management, Everest Capital, Pequot, Maverick Capital, Och-Ziff, Highfields Capital, Kingdon Capital, and Omega Advisors. According to the NACUBO study, some of the frequently allocated funds of funds are Commonfund, Blackstone, and Torrey.3

When Robertson's Tiger Management announced on March 31, 2000, that it was liquidating, this meant that a number of endowments would have to reallocate assets. A quick sampling showed that a great percentage of the endowment money in Tiger stayed within the hedge fund industry. For example, the $256 million endowment at the University of the South in Sewanee, Tennessee, announced that it was looking at six to eight hedge funds for the $15 million it had liquidated/withdrawn from Robertson.4 The University of North Carolina (UNC) said it continually rebalanced while Robertson was going through this difficult performance so that by the time he had retired the allocation was down to 3 percent. It had gradually increased allocations to other managers.

Increasingly in 2000, more U.S. endowments became involved in hedge funds as they want to reduce dependence on market-related securities. For example, in March, the University of Tennessee, Knoxville, announced its first foray into hedge funds by hiring Commonfund to manage $20 million. Texas A&M University's foundation announced it was more than tripling its hedge fund holding to 10 percent within 18 months.5

Louisiana State University Agricultural and Mechanical College said it was looking to make a 5 to 10 percent or $11 million to $22 million allocation to hedge funds later in 2000—its first foray.6

CASE STUDIES

I talked with four endowments to get their perspectives of the hedge fund industry. What were their objectives? Did their experiences live up to expectations? What types of strategies and managers did they use? Did they prefer superstar managers? Had they fired any managers—and if so, why? Did the endowments make their own decisions or did they rely on consultants? Did a fund of funds approach fit into their picture? What would they like see changed in the hedge fund industry?