Press

CIO Magazine’s Matt Toledo provides an analysis of both the NACUBO’s 2023 Fiscal Year study and MPI’s 9-th annual quantitative report of Ivy Endowment performance and risk. In his article U.S. College Endowments Gained 7.7% in Fiscal 2023, Although Suffer From Weak Alternatives Returns (ai-cio.com)  ​​​“For multiple reasons it is unlikely that endowments that are heavily allocated to private markets and alternatives veer from the so called ‘Yale model’ after the challenges of fiscal year 2023. Our research shows that Ivy and elite endowments are risk takers, and their portfolios are not particularly efficient​,​” MPI CEO Michael Markov was quoted when discussing the possibility of shifting allocations to public equities.

An extensive coverage by Julie Segal in her Institutional Investor article of the MPI’s 9-th annual Ivy League endowment report. She writes: “With little transparency into endowment portfolios, MPI used its proprietary returns-based style analysis to determine the exposure that the Ivy League and elite colleges had to major asset classes — and their contribution to the performance of the entire portfolio in fiscal year 2023… Even in a good year, “you’re not going to get a lot of transparency,” Markov [MPI’s CEO] told Institutional Investor. “But in a bad year, you’ll get zero transparency from endowments. It’s not pensions where they have to give something to people.”

“Risk parity strategies – designed to withstand all economic circumstances – have been tested in recent times by the triple threat of unfavourable rates, spiked inflation and asset correlation breakdowns. Few managers in the field were above water through most of 2023; some saw increased portfolio risk exacerbated by leverage and untamed volatility, says a study by Markov Processes International.” – writes Luke Clancy in his Risk.net article “Can risk parity ride out the storm of correlated asset chaos?” The article extensively quotes MPI’s original research.

Jeff Schwartz, president of Markov Processes International, a fintech firm that advises wealth and asset managers, drew a parallel between bitcoin and emerging markets and commodities, two asset classes that gained traction in investors’ portfolios in the 1990s and early 2000s.
Those “were asset classes far better understood by most investors than bitcoin is,” Schwartz said. Nevertheless, “allocations were capped at a very low level (at the time), out of prudence.”
– writes Reuters reporter Suzanne McGee in her story that discusses the approval of U.S. bitcoin ETFs.

“Quant funds that employed risk parity saw their riskiness as measured by realized volatility levels surging 50% to 80% higher than their stated targets, according to a study from Markov Processes International obtained by Bloomberg based on results through November… Markov found that majority of the 10 popular risk-parity strategies it reviewed saw record levels of volatility, with a “staggering” gap between the winners and losers.” – writes Bloomberg’s Isabelle Lee and senior editor John Authers in his column discussing results of MPI’s research Risk Parity Not Performing? Blame the Weather.

Matt Toledo with CIO Magazine reviews in this article recent performance of top endowments from Yale, UPenn and Stanford and compares them with projections from MPI Transparency Lab. “Stanford announced on Thursday a 4.4% return in fiscal 2023, slightly below MPI’s estimate of 6.42%. Stanford attributed its underperformance—as compared with Cambridge Associates’ 6.9% median return for university endowments—to losses in its venture capital investments, in line with MPI’s projections,” – he writes.

“Style analysis is a useful tool that can illuminate how a portfolio operates if people understand how to use it, which Markov and his employees do, Sharpe said in an interview. “I would pay serious attention to the results they produce,” he said.” Justin Mitchell quotes Nobel-prize winner in Economics William Sharpe in his article.

“…the reports posted by Oregon and other public pension funds routinely understate these risks, new research has found. The new findings are from Michael Markov, a mathematician who heads MPI, a financial technology company. He provided early warnings about the fraudulently consistent returns in Bernard L. Madoff’s Ponzi scheme. I’ve known Mr. Markov for years. And he now says that, on average, the risks being carried by public pension funds are at least 20 percent greater than they are reporting, largely because they aren’t taking account of the true risks embedded in private equity,” writes Jeff Sommer in his weekly column about MPI research focused on uncovering risks of public pensions. “His company uses proprietary statistical techniques to adjust for these lags and posts the results for individual pension funds on its website for everyone to see,” writes Sommer underscoring the importance of the MPI Transparency Lab.

“State pension funds with higher allocations to private markets will underperform their peers with greater exposures to global equities this year, according to a report from the MPI Transparency Lab issued Wednesday,” writes in her article Cheyenne Ligon.

Michael Thrasher with Institutional Investor provides an overview of MPI Transparency Lab’s FY2023 performance projections for major pensions and endowments in his article
Private Assets Drove Endowment and Pension Returns Last Year. Now They Are a Drag. He writes “…from returns you can glean a lot of information: risk, the skill, the trend, the style drift, you name it,” MPI chief executive Michael Markov said. Strategies change sometimes. When things don’t add up, there is a red flag.” Among MPI’s customers are U.S. regulators, who use its tools to surveil funds…