Alta Trust Company has partnered with ETF Model Solutions to launch the Endowment Collective Fund.
The Endowment Collective Investment Fund (CIF) seeks to improve risk-adjusted returns of traditional two-dimensional portfolios of stocks and bonds by adding alternative investments, such as private equity, hedge strategies and real assets to create a 3-dimensional portfolio.
Managers of university endowments, pension, and defined benefit plans have historically utilized lower-correlated alternative investments to improve the risk-adjusted returns of their portfolios. ETF Model Solutions, through the Endowment CIF, now brings the Endowment Investment Philosophy to the defined contribution plan space. However, rather than private placements or limited partnerships, the Fund uses liquid alternative investments, such as exchange-traded funds and mutual funds to obtain its alternative asset allocations.
ETF Model Solutions believes that the 3-dimensional Endowment CIF offers 4 major benefits when compared to most target date or balanced funds: (1) added protection for the Plan Sponsor, as both the trustee and the manager of the CIF serve in a fiduciary capacity; (2) reduced portfolio volatility than portfolios with greater equity allocations due to its hedge strategy holdings; (3) protection from inflation due a greater allocation to real assets, such as commodities, precious metals, real estate and infrastructure investments; and, (4) lower interest rate risk due to a smaller allocation to fixed income investments.
The Endowment CIF utilizes a core-satellite portfolio construction with low-cost, cap-weighted equity and fixed income ETFs comprising the core allocation of the asset class, with fundamentally-weighted funds utilized in an attempt to gain alpha. The strategically-managed Endowment CIF is presently targeted to an allocation of 40% global equity, 20% global fixed income and 40% liquid alternative investments.
Alta Trust maintains selling agreements with most major retirement plan platforms, thus plan advisors can offer the Endowment CIF to their Plan Sponsor clients through their existing platform relationships. Plan Sponsors can add the Endowment CIF to their retirement plans through a simple participation agreement, while maintaining their current investment options as well as their existing advisor/TPA/recordkeeping relationships.
CIFs are pooled investment funds available only to qualified retirement plans such as defined contribution 401(k) and defined benefit plans and are regulated by state and federal organizations, such as the Office of the Comptroller of the Currency. CIFs are priced daily through the NSCC, just like mutual funds.