In his book Unconventional Success: A Fundamental Approach to Personal Investment, Swensen recommends the following allocations, for individual investors who want a “well-diversified, equity-oriented portfolio”:
30% Domestic stock funds
20% Real estate investment trusts
15% U.S. Treasury bonds
15% U.S. Treasury inflation-protected securities
15% Foreign developed-market stock funds
5% Emerging-market stock funds
In an interview with Yale magazine, Swensen said, economic conditions might call for a modest revision. He now recommends that investors have 15 percent of their assets in real estate investment trusts, and raise their investment in emerging-market stock funds to 10 percent.
Get my white paper: The Informed Investor: 5 Key Concepts for Financial Success.
The following illustrates an implementation of the Swensen allocation with a strong small and value tilt. Despite having only 70% in equity, it has outperformed the benchmark S&P 500.
Get my white paper: The Informed Investor: 5 Key Concepts for Financial Success.
David Swensen on fund of funds
Posted on: January 17, 2010
Quoted from David Swensen’s interview with WJS …
Fund of funds are a cancer on the institutional-investor world. They facilitate the flow of ignorant capital. If an investor can’t make an intelligent decision about picking managers, how can he make an intelligent decision about picking a fund-of-funds manager who will be selecting hedge funds? There’s also more fees on top of existing fees. And the best managers don’t want fund-of-fund money because it is unreliable. You need to be in the top 10% of hedge funds to succeed. In a fund of funds, you will likely be excluded from the best managers. [Mr.] Madoff also relied enormously on these intermediaries. He wouldn’t have had nearly as much resources were it not for fund of funds.
What do you think? Is it too strong a statement? Or is it right on target? Please share your thought.
Get my white paper: The Informed Investor: 5 Key Concepts for Financial Success.
Robert Shiller gives praise to David Swensen before lecture on human foibles in investment
Posted on: January 14, 2010
Get my white paper: The Informed Investor: 5 Key Concepts for Financial Success.
Harvard University Endowment significantly increased its holding of Market Vector Russia, iShare Mexico and iPath India in third quarter of 2009.
Table: Top 10 holdings in Harvard University Endowment’s public portfolio
| Rank | Names | 9/30/09 (x1000sh) | 6/30/09 (x1000sh) | Change |
| 1 | iShares E. Mkt | 10298 | 9712 | +586 |
| 2 | iShares Brazil | 3355 | 3294 | +61 |
| 3 | iShares China | 4962 | 4178 | 784 |
| 4 | iShares S. Korea | 4127 | 4349 | -222 |
| 5 | iPath India | 1882 | 1388 | +494 |
| 6 | iShares S. Africa | 1624 | 1595 | +29 |
| 7 | iShares Taiwan | 7297 | 6836 | +461 |
| 8 | Mkt vector Russia | 2596 | 882 | +1714 |
| 9 | iShares Mexico | 1639 | 570 | +1069 |
| 10 | Vanguard E. Mkt | 1568 | 1758 | -190 |
Get my white paper: The Informed Investor: 5 Key Concepts for Financial Success.
On his anticipation of the crisis
We were absolutely aware of potential issues. And that was months before Bear Stearns. That said, we weren’t prepared for the magnitude of the crisis, or its duration.
Bloomberg: “Pimco plots asset strategy to mimic Yale without cash strain”
Posted on: September 3, 2009
Pimco mimicking Yale
Here is the second paragraph of the Bloomberg report:
“The richest colleges beat market indexes in the decade through June 2008 by loading up on hard-to-sell assets such as private equity and real estate, while cutting stocks and bonds, a style pioneered by Yale University’s David Swensen. Pimco is refining the model to appeal to investors who want more flexibility to sell assets quickly to raise cash.”
Students of David Swensen understand that the Master avoids liquid assets because “market players routinely overpay for liquidity.” Serious investors benefit by avoiding overpriced liquid securities. Instead, they locate bargains in less liquid markets. This wisdom is borne out by his track record over the last two decades.
David Swensen quote of the month
Posted on: August 21, 2009
Investment success requires sticking with positions made uncomfortable by the variance with popular opinion. Casual commitments invite casual reversal, exposing portfolio managers to the damaging whipsaw of buying high and selling low. Only with confidence created by a strong decision-marking process can investors sell mania-induced excess and buy despair-driven value.
David Swensen quote of the month
Posted on: August 10, 2009
A rich understanding of human psychology, a reasonable appreciation of financial theory, a deep awareness of history, and a broad exposure to current events all contribute to development of well-informed portfolio strategies.
