UConn’s Endowment Is Abandoning Hedge Funds for New Kind of ETF

The University of Connecticut’s endowment is turning away from hedge funds and embracing a cheaper way to mitigate risk in its $634 million investment portfolio.

The UConn Foundation sold almost all of its hedge fund exposure during the most recent fiscal year and bought so-called buffer ETFs, said David Ford, chairman of the investment committee. The increasingly popular exchange-traded funds, which use options to protect against losses while capping upside gains, have amassed more than $58 billion in assets, almost all within the past three years.

Market watchers say it’s a sign of growing institutional adoption of the ...