This book would also be an excellent resource and read for pension fund managers especially those in states whose pensions are in trouble. For nine of the past ten years, yale s tenyear record ranked. However, swensen strongly advises that private investors take a very different approach, concentrating on core asset classes and using low cost passive funds. The endowments of most prominent universities suffered terribly, causing many of these institutions to drastically slash budgets and cut. Underwater endowment a fund whose market value is less than its historic book value. Harvard and yale endowments lackluster gains raise wider. Swensen, cio of yale university and the author of pioneering portfolio. The yale endowment 4 2 unrestricted miscellaneous speci. Swensen is the chief investment officer of yale university and the bestselling author of pioneering portfolio management. There are few more influential investors than the endowment funds of the ivy league universities. David swensen made yale fabulously rich and changed.
Given his incredible track record, many individual investors have wanted to follow his investing advice for their own portfolios. The universitys chief investment officer for nearly 35 years, swensen has raised an entire generation of endowment cios in his image, and explained yale s strategy to the world in his hit book. If the endowment cannot provide adequate funds, it could put the universitys finances into trouble. Yale s endowment being a fund of funds is an ongoing boon. April 20, 2010 the devastation caused by the crash of 2008 was not limited to individual retirement portfolios. When yale s endowment fund was soaring, other ivies rushed to copy the alternative investment strategy of chief investment officer david swensen. David swensen has built yales exceptional endowment returns largely through.
Why the yale model of investing doesnt work for everybody. In 2014, the yale investments office developed a plan to address climate change risks in the endowment portfolio. Endowment reports each year, the investments office distributes a press release on investment performance and publishes an update on the endowment. He was the first to peg hedgefund style absolute return funds as a separate asset. The yale endowments 2018 annual report insider monkey.
Over the years, the doyens in new haven have changed the way many fund managers and large investors manage their own money. Established in 1718, yale s endowment consists of money donated to yale, as well as money yale invests. He serves on the boards of tiaa, the brookings institution, carnegie institution, and hopkins school. Here swensen provides a brief history of endowment funds and explains the purpose of. But the past decade has been less kind to swensens strategy. The yale model depends on putting money in funds for extended periodsthe endowment doesnt pick and choose individual investments by the funds. Put the taxinefficient reits, bonds, and emerging markets funds in. Since the books are expensive, you may wish to share costs with group members.
The yale endowment 2015 a look at the 30year performance. Cios in his image, and explained yales strategy to the world in his hit book. Swenson does an excellent job explaining the method and reasoning behind the endowment he manages and why it takes a different approach and thinking to managing an endowment as big as the one he manages. Why you should still invest like yale seeking alpha. The money management gospel of yales endowment guru the. His advice to the individual investor is really good, backed by plenty of academic research. Swensen is the chief investment officer of yale university and the bestselling. Swensen published his endowment investment model in the book.
During his fourteen years as yales chief investment officer, david f. He has been the chief investment officer at yale university since 1985. Furthermore, forprofit mutual fund companies have a fiduciary obligation to. Like a true endowment fund, the income generated by the gift may be spent. The plan has been implemented through yale s external managers, who collectively are responsible for managing nearly all of the universitys endowment assets. David swensen took over management of yales endowment in 1985. The battle of the endowments posted october 20, 2016 by ben carlson i talked to anora mahmudova from marketwatch earlier this week about everyones favorite topic in the institutional money management world lately the ivy league college endowment performance figures. Private equity, hedge funds, venture capital, real estate, and the like accounted for. Yales endowment provides critical support for all of the universitys endeavors. The yale endowment 2 endowment fund allocation fiscal year 2004 professorships books scholarships miscellaneous speci. The chief investment officer of the yale endowment is a guy named david swensen who wrote a terrific book on investing where he recommends a passive index fund asset allocation appropriate for everyday investors that uses some of the same thought processes as the yale endowment. The endowment book of life the endowment book of life ebol program is a planned giving program that offers participants an opportunity to leave both a financial legacy and a historical legacy to the community. Few would have anticipated such an outcome when swensens book was published in 2005.
Our updates describe recent performance, address investment issues, and highlight topics relating to the university. You can see that most of the funds have gone allin on the yale model, which relies heavily on alternative investments. Its really the yale model, since it was yale and its longtime endowment chief, david swensen, who led the way. Swensen born 1954 is an american investor, endowment fund manager, and philanthropist. A full time yale faculty member is required to approve the application. The yale endowment consistently ranks first or second for the best performing large endowment each year. Over the years, the doyens in new haven have changed the way many fund managers and large. Swensen, has shown remarkable success under his administration. Lessons from yales endowment model and the financial crisis.
At the time of the great financial crisis, the value of the yale endowment plummeted, reporting a decline of 24. The majority of yales noncompliant investments are held through these funds. An endowment is an ongoing pot of income for a nonprofit organization. Yale universitys endowment, the worlds second largest, grew 12. The yale endowment consistently ranks first or second for the best. Ever since then, half of the endowment s investments have been maintained in assets that are easy to liquidate. Yale endowment helped pioneer investing up to around 20% in real estate as part of a diversified investment portfolio. Princeton university one of the worlds most successful institutional fund managers presents. The yale endowment consists of thousands of funds, with around threequarters being true endowment and onequarter being the money for investing. Swensen has an outstanding record as chief investment officer for the yale endowment, which has shown strong returns from sophisticated investments. Approximately 84% of funds constitute true endowment, gifts restricted by donors to provide long. It is not a secret that yale universitys endowment fund, headed by chief investment officer david f.
Spending from the endowment which is the largest source of revenue for. The endowment book of life jewish foundation of manitoba. The university further seeks to limit illiquid assets venture capital, leveraged buyouts, real estate, and natural resources to 50% of the portfolio. The endowment was established at yale university, then yale college, in 1718 from an initial fund of. In the past, gifts from members have been designated for the yale library associates endowment fund, which exclusively supports purchases of rare books and manuscripts, or the yale library associates celebration fund, which supports digitization, cataloging, and preservation. Background on the yale university endowment fund yale university uses a very specific model when it comes to investing for their endowment fund, this is known as the yale model.
I enjoyed this book from david swenson from the yale endowment. The david swensen yale endowment portfolio is exposed for 70% on the stock market its a high risk portfolio and it can be replicated with 6 etfs in the last 10 years, the portfolio obtained a 7. How the yale model ate endowments and everything else. Replicating yales endowment portfolio with accessible. This is notable because in it he discusses what individual investors should do to ensure that their investments perform well. However, unlike a true endowment, the principal may be spent, but not unless or until the conditions under which the donor has specified that it may be spent have been met. David swensens guide to sleeping soundly features yale alumni. For complete contact details for the yale university endowment fund investment staff please access your copy of our endowment database.
In 2014, i wrote to yales active external investment managers, outlining yales. Nikki kraus and her colleagues have gathered into this short, experiencebased book a comprehensive guide to best practices in endowment management for higher education, which situates good governance of the endowment as one of the most significant oversight responsibilities exercised by governing boards. Yale no longer has the second largest endowment among institutions of higher education. Harvard and yale have the worlds two largest endowments, at.
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