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I wanted a variety of perspectives on the issues. The University of North Carolina at Chapel Hill endowment represents the large public university that is quite sophisticated and experienced in hedge funds. The $1.1 billion endowment has been allocating to hedge funds since 1990 and has consistently allocated about 30 percent to hedge funds through 20 managers. Stanford Management Company, which invests Stanford University's $8 billion, represents a private institution that has been involved with hedge funds for quite a while. Stanford, which began its first hedge fund allocation in 1990, currently allocates to 18 managers.

Vassar College, a private school with an endowment of $675 million, started its hedge fund program in 1992 and allocates about 11 percent of its portfolio to five hedge fund managers. Wesleyan University, a private institution with an endowment of $580 million, began allocating to hedge funds in 1998 and currently allocates about 10 percent through seven managers.

Despite the differences among these endowments, some similarities existed.

Similarities.

Three of the four endowments had recently gone through reassessments of their investment and allocation processes, and significant changes had been made. Generally, they wanted to build a more professional investment office and enhance the quality of the investment fund program. Among other things, this included improving performance, adding alternative investments, moving toward equities, and moving away from fixed income. Major staff changes were made.

While the specific objective and benchmarks differed, the general goals were the same: enhance returns, reduce risk, and provide diversification.

All the endowments allocated at least 10 percent to hedge funds.