David Swensen Yale Endowment Allocation
“Anointing winners and losers on the basis of 12 months’ worth of performance is silly in the context of portfolios that are being managed with incredibly long time horizons” – David Swensen, CIO, Yale University.
Yale has pioneered an unconventional portfolio management to manage its endowment fund. The fund moved away from domestic equities and bonds, to rather less efficient markets, i.e. private equity, real estate, and hedge funds, when the majority was still applying a 60/40 approach to their portfolio management.
David Swensen / Yale investment philosophy could be summarized in five pillars:
1) Believe in equities – both publicly traded or private, as equities are essential a claim on real income
2) Diversification – reducing risk by limiting exposure to any single strategy
3) Seek opportunities in less efficient markets
4) Use outside managers for active strategies
5) Manage actively – avoid bonds and other asset-return-dilutive instruments
Source: Yale Endowment
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