Investment Policy for CSU Auxiliary Organizations
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Asset Allocation Guidelines

Determining what percentage of the portfolio will be invested in various asset classes-stocks, bonds, real assets, private capital, hedge funds-is the single most important component of an investment policy. Numerous studies have shown that asset allocation accounts for the majority of investment performance. Asset-allocation guidelines should be logically consistent with the endowment's specified return objectives and relevant risks.

For most institutions, the allowable ranges or variation from target should be relatively narrow. Narrow asset-allocation ranges allow the flexibility to make small bets or tactical tilts, while protecting the investment policy and the endowment from the pressure to abandon sound, long-term strategy in the face of short-term adversity.

Checklist Questions

  1. Does your institution's investment policy specify asset allocation guidelines and are they defined within narrow ranges?
  2. Does the policy statement include a discussion on the institution's view of risk and its impact on the asset-allocation guidelines?
  3. Do the asset-allocation guidelines reflect the long-term view toward measuring investment performance?

Content Contact:
Lori Redfearn
(562) 951-4815
Technical Contact:
Last Updated: July 05, 2016