Big endowments differ from their smaller counterparts

The big guys embrace diversification through alternative investments. This is the story of endowment asset allocations for 2014 and it seems like this will continue this year. Equity exposure at large university endowments is only 31% versus smaller funds which have 40-55+%. Everyone seems defensive versus the classic 60/40 equity/bond split, but the larger funds do it in a different way. They will have 1/3 the fixed income and 1/3 the equity, but over 2 times the alternative strategies. 

It seems as though this is a discrepancy that should not exist. Hedge funds are more accessible, cheaper and in forms that can be broken into smaller pieces, so it seems as though this issue is worth exploring. With the potential for rates being biased upward over the next few years and with the current equity rally gaining age, an assessment of hedge fund alternative seems appropriate for smaller endowments. 

Is the lower allocations associated with the cost of monitoring and due diligence or an issue of education? Brokers and wealth advisors who serve smaller endowments need better education, fund of funds are expensive and the cost of due diligence is not negligible. The current mix has to change but that has to be in the context of cost and effort. Perhaps the outsourced CIO concept will be the solution, but smaller funds are at risk in the current environment.