2035: An Allocator Looks Back Over the Last 10 Years

Writing as a fictional endowment CIO looking back from 2035, Asness argues that U.S. equities purchased at a CAPE in the high 30s delivered only ~2% annualized above cash over the decade, as the multiple compressed to around 20 — proof that starting valuation dominates even strong earnings growth. Private equity drew the sharpest criticism. Asness contends that allocators paid hundreds of billions in fees for levered equity exposure that underperformed public markets, while volatility-smoothing gave only the illusion of safety. Private credit fared no better: he describes it as high-fee public credit, with structured products (SRTs) repeating the mistakes of CDOs-squared. The endowment's crypto allocation — initiated at $100,000 Bitcoin, doubled at $250,000, and worth roughly $10,000 a decade later — compounded the damage. Abandoned trend-following strategies and a persistent tail-hedging program that bled premium in slow bear markets added further drag. The piece is structured as a cautionary inventory of institutional investing errors: chasing recent outperformance, mistaking fee-smoothed volatility for genuine diversification, firing value managers at peak spread, and anchoring to the prior 30 years of private equity IRRs as a guide to the next 10. Non-U.S. equities, which the endowment had removed from its benchmark in early 2025, delivered 5–6% real annualized returns over the period — the one asset class the endowment systematically missed.