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The endowments were quite pleased with their hedge fund experience and found that their goals were being met. The year 2000 was especially telling for them. While the traditional equity managers were having problems, the hedge funds did quite well. Return patterns were different from returns of traditional equities, and volatility had also been reduced.

While three of the four endowments used a consultant as a sounding board and a source for reports, all did their research and due diligence in-house.

Performance was not a reason to fire a manager. The general consensus was that managers would be fired only if they did not adhere to their stated strategies, did something unexpected, or were not actually the type of manager they described themselves as.

While the endowments were happy with their hedge fund experience, they universally did not like or use the term "hedge fund," because it was a generic term that evolved over time to describe many different unrelated styles of trading. Wesleyan and Stanford preferred "absolute return," while UNC used the term "marketable securities."

The endowments did not feel that fees were too high, but a preference existed for hurdle rates. A manager who did worse than the hurdle shouldn't get paid, while one whose return was above the hurdle should get a higher percentage.

Differences

The University of North Carolina (UNC) takes the view that to protect itself against single-manager disasters, potential fraud, or adverse situa-