28 Aug 2025 “Don’t Be a Monkey”

Even if you didn’t attend an Ivy League school, you can still learn from their investment mistakes. Jason Zweig’s recent Intelligent Investor column highlights how several elite universities were caught with too many illiquid assets when they needed cash and relearned a lesson they should have retained from the 2008–2009 financial crisis. When federal funding came under threat, schools had to raise money quickly. But with much of their portfolios tied up in illiquid assets, they were forced into a bind.

The article is worth reading in full, but below is the allocation breakdown Zweig cites:

“On average, in fiscal 2024, educational endowments with more than $5 billion in assets held only 2% in cash, 6% in bonds, 8% in U.S. stocks and 16% in international stocks, according to the National Association of College and University Business Officers. That left two-thirds of their total holdings in private funds and other non-traditional assets that can’t readily be turned into cash.” (emphasis mine) During the 08-09 financial crisis, universities also had to sell assets at losses and when you compare the 2024 allocation with 2009, the share of illiquid assets has actually increased since then!

The scramble for liquidity led schools to borrow or liquidate at discounts. Alternative investments (private equity, secondary private equity funds, venture capital, hedge funds, etc) are difficult to sell and often have static values, providing very little visibility into current market price. That’s quite a premium to pay to generate cash.

Managing an endowment is different from managing a household portfolio, but their mistakes still hold valuable lessons for us:

Keep liquidity within reach: The amount of necessary liquidity varies with your circumstances. High-yield savings accounts, money market funds, or short-term bond ETFs can serve as a cash buffer and are valuable holdings within your overall investment allocation. There are different schools of thought for how much of an emergency fund to keep so talk to us if you need help thinking through your target.

Stress-test your financial readiness: Ask yourself: What if I lose my job? What if my home needs a major repair? Are my funds accessible when I need them? Am I being overly optimistic about how much I can adjust spending levels to cut back in an emergency? Liquidity provides the flexibility to handle these scenarios without panic or forced sales.

Match investments with goals: If you have a planned upcoming expense, even without an exact date, investing those funds in the market is risky. For example, if you’re saving for or planning a renovation, the start date may vary depending on contractor’s other jobs or permitting timelines. It may feel like you are missing a possible return on your funds by keeping that cash in savings or short-term bonds, but selling investments at a loss to fund an expense is less than ideal. A proper liquidity buffer helps you stay disciplined with your long-term strategy.

Avoid investments with little transparency: Many alternative investments don’t provide current valuations, so the investment stays flat on a balance sheet or account statement until some sort of partial or full liquidation event. Complexity does not equal added value.

Zweig ends with the warning: “Don’t be a monkey,” In our house, we’ve been reading a lot of Curious George lately so this phrase popped out to me. Like George, we humans often get into situations with unintended outcomes. The irony is that these institutions are often thought of as “the smart money” with access to top managers, sophisticated strategies, and endless resources. Even the smartest investors are still humans evolved from monkeys, and humans are prone to the same behavioral mistakes as everyone else. We can be tempted to chase returns, overestimate our resilience, and ignore the risks of needing cash at the wrong time.

With some structure and foresight, you can weather surprises without sacrificing long-term growth and reassess when life changes. Don’t let complexity or prestige trick you into overlooking the basics and forgetting lessons from our past.

Let us know if we can help talk through your situation.

The content above is for informational and educational purposes only. The links and graphs are being provided as a convenience; they do not constitute an endorsement or an approval by Beacon Wealthcare, nor does Beacon guarantee the accuracy of the information.