For the past 23 years, James Martin, CIO of the M.J. Murdock Charitable Trust in Vancouver, Washington, has been quietly refining his approach to risk. The process has been evolutionary, not revolutionary, but the results have been remarkable: Over the past two decades, the foundation has delivered an annualized return of 14.81 percent, through December 2009.
Even in 2008, when the S&P 500 index plummeted by 37 percent, the endowment lost just 6 percent. Last year it rose 17.63 percent. This consistent performance reflects the CIOs risk-based approach to asset allocation. Martin, 62, seeks managers and investment products with low-, medium- or high-risk characteristics and groups them into three risk buckets: capital preservation, equity/real estate and alternative assets.
I want to give managers the maximum freedom to deliver the highest return possible within a certain spectrum of risk, without any preconceived ideas or constraints on our part, he says. It appears to be working.
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