Thursday, March 12, 2009

An Answer to the Endowment Blues

by Daniel Bennett

College endowments have taken a hit over the past year, dropping in value along with the stock market. I recently learned of an investment that could be the saving grace for college endowments. The Congressional Effect Fund seeks to minimize political risk by investing in securities (S&P 500 index, ETF indices, etc) only when Congress is out of session. The fund invests in risk averse instruments (t-bills, money market funds, etc) when Congress is in session.

According to the fund's fact sheet, it:
"...has analyzed empirical data since 1965 that shows that on
days Congress was in session, the S&P 500 index had
an annualized price gain of only +.31% as compared
to +16.15% on days when Congress was out of session."
This is a fascinating investment philosophy that appears to have some merit, especially with the regulatory uncertainty that has spooked investors away from the market over the past few months. College financial managers might consider the Congressional Effect Fund (Cussip 207267105) as a means of mitigating the political risk of the current business regulatory environment.

**Disclaimer - neither the author nor CCAP are affiliated with the aforementioned investment fund. The above reference is for informational purposes only and does not constitute investment advice. Investors should seek professional financial advice regarding the suitability of investing in any securities or following any investment strategies.

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