A new exchange-traded fund, seeded with $2.5 billion from the University of California, is not only the largest U.S. ETF debut ever-it's taking a starkly different approach from how many college endowments handle risks.

Universities often play a risky game with their endowments, investing in hedge funds and alternative assets like gold, oil, and other commodities. The University of California's investment arm, however, shuns that model by avoiding hedge funds entirely in its $29.5 billion endowments portfolio, which makes up a chunk of its overall $236 billion in investments.

The State Street SPDR UC Investments 90/10 Endowment Strategy Index ETF, which launched Sept. 2, mimics that uniquely conservative approach, though that doesn't mean it's without risk.

"Hedge funds are a fantastic business if you're on Wall Street, and you can charge a great fee," Jagdeep Singh Bachher, the University of California's chief investment officer, said during a July 2025 board meeting. "My only regret is not the fact that we haven't invested in hedge funds, it's that I'm not a hedge fund manager."

Bachher, a vocal critic of alternative assets, gradually removed hedge funds entirely from the endowment's portfolio.

The State Street ETF follows one of the University of California's endowment models of investing 90% in the S&P 500 and 10% in short-term investment-grade corporate bonds. The index based on this model was developed by UC's investment arm, UC Investments, and S&P Dow Jones Indices. Index providers typically receive a licensing fee from ETF issuers for the right to track a specific index.

"The strategy reflects UC's conviction that low-cost, liquid, diversified public markets exposure can deliver compelling long-term returns while avoiding the complexity and illiquidity of traditional endowment models," State Street Investment Management said in a news release.

State Street had no further comment about the new fund. Baccher and UC didn't immediately respond to a request for comment.

But the fund isn't as conservative as it might seem-mainly because a 90% weighting in the S&P 500 is more of a gamble than it appears.

Sure, it's a "passive" investment in an index. But that index is now overwhelmingly leveraged to the artificial-intelligence and tech trade due to outsize weightings in Nvidia, Microsoft, Amazon.com, and others in the Magnificent Seven, as well as chip giant Broadcom. Those eight stocks represent nearly 40% of the S&P 500's overall market value.

Of course, UC and the new ETF are far from alone in facing this risk. The index's heavy tech concentration has to be a valid concern for investors in all S&P 500 funds, endowments and ETFs alike.

Bachher acknowledged this in another board meeting in March. "Even if there is a correction of some sort and things come down in value, having the patience to be able to ride this out over the long run is what is important," he said at the time.

It's a strategy that has served the university well. UC's Blue and Gold Endowment Pool, which launched in March 2019 and is the basis for the 90/10 strategy, has enjoyed an average annual gain of 9.4% over the past five years.

Still, other endowments have done just fine lately with positions beyond traditional blue-chip stocks. Yale, for example, has famously invested in private equity, real estate, hedge funds, and other so-called alternatives-a move designed to increase diversification. Many endowment funds, as well as other institutional investors, follow the so-called Yale Model that was pioneered by David Swensen. Yale's endowment has returned 9.4% a year over the past decade, according to the most recent figures from the university.

There's even an ETF that takes a more Yale-like approach to endowment investing, and it's beating the market this year. The Cambria Endowment Style ETF, which invests in a mix of equity, commodity and managed futures funds, Treasuries, and individual stocks such as CSX, JPMorgan Chase, and Nvidia, is up 14% so far in 2026. The S&P 500, by way of comparison, has gained about 12%.

Cambria describes the fund, which is actively managed and has an expense ratio of 0.22%, as one that is "designed to pursue returns across various market conditions while maintaining an aggressive risk profile."

So investing like a big university endowment means that you'll need the stomach to tolerate volatility. Cambria's fund may make a fair number of speculative bets, but the index fund strategy that UC's endowment is pursuing isn't for the faint of heart either, given how concentrated the S&P 500 is these days.