We extend the megafund concept for funding drug discovery to enable dynamic leverage in which the portfolio of candidate therapeutic assets is predominantly financed initially by equity, and debt is introduced gradually as assets mature and begin generating cash flows.
Given the risk and leverage in the endowment portfolios of the elite universities for it is that, combined with unique and special access to very talented managers and investment opportunities, that gave rise to these giant returns the losses in 2008 seem unremarkable.
But this leverage, which magnifies gains in the portfolio, works in reverse, too, if the fund's investments drop in value.
John Bogle (founder, the Vanguard Group): Nobody seems to have recognized that these investment bankers, basically relatively small firms, would never have had 33 times leverage in a portfolio that's a long way from a portfolio of treasury bills, believe me, of assets.
On the subject of technology investments, one of Rocket Internet's interesting selling points is how its companies can potentially leverage some of the other assets in the portfolio to help their own growth.
Most of the leverage in endowment portfolios was added in this way by allocating to hedge and private equity managers who routinely and expressly borrow and lever up the money they have under management.
The leverage killed the portfolios in 1994 when rates briefly spiked and bond prices fell.
Proponents answer that the reduced risk from additional diversification more than offsets the additional leverage risk and that leverage through publicly traded futures and prime brokerage financing of assets also means a high percentage of cash in the portfolio to cover losses and margin calls.
Now, the advisor is able to leverage a portfolio of resources to help support the student with experiences that provide intentional application of these strengths in preparation for their future life and career path.
The leverage also enhances the portfolio's market fluctuation.
