The book is essentially a guide to Yale’s model, which Swensen … Pioneering Portfolio Management provides a road map for creating a successful investment programme. He's probably more skeptical than most of us when it comes to whether most folks can outperform the market or not. There’s more money than certified talent in the world of investing, so outstanding investment managers have many choices because so many investors want to be their clients. 7 Full PDFs related to this paper. Start by marking “Pioneering Portfolio Management: An Unconventional Approach to Institutional Investment” as Want to Read: Error rating book. Dave Swensen is a modern legend and though he might not admit it, the forefather of the dominant investment style found in endowments, foundations, and family offices around the world. This paper. It was also full of blow-up stories. The other piece of the Swensen Portfolio puzzle is the ability of ordinary investors to replicate it. Note: Some Swensen Portfolio models show an asset allocation of 15% REITs and 10% emerging markets. David Swensen believes in investing in market-cap-weighted US equities. May 22nd 2000 Wish I could give it 4.5 stars, but I'm rounding down. Third, … A contrarian investment approach that promotes a well-diversified, equity-oriented portfolio that rewards investors who exhibit the courage to stay the course. Today we’re going to talk about the Swensen Portfolio. As a result, his investment style has been emulated by … Great starter book for anyone getting into indirect fund investing. Portfolio Management Welcome to the Portfolio Management Program at Morgan Stanley. Here, he articulates his philosophy and strategies of portfolio management. David Swensen is the President and Chief Investment Officer of Yale’s endowment. If timber prices appear to be relatively low, the cutting program can be curtailed, deferring current year harvests to future years. What it is, how you can replicate it, and whether it’s right for you. Swensen discusses the three tools of portfolio management: 1) asset allocation -- responsible for ~90% of portfolio returns 2) market timing -- mostly a fool's game, and 3) security selection -- contingently appropriate dependent on the strategy and time horizon. The best lesson I learned from this book was the importance of asset allocation in addition to great investment idea generation. During a bull market, US and international stocks will do well. Because you can purchase all of these asset classes through ETFs or mutual funds, your expense ratio will be small. You may find less value in it if you have no experience or education in asset management, but he does a nice job summing up basics of asset classes and the typical pitfalls faced by many institutional investors. It makes copying their models even easier as you don’t have to fit the pieces together. Dave Swensen is a modern legend and though he might not admit it, the forefather of the dominant investment style found in endowments, foundations, and family offices around the world. The final product is what’s known as the Swensen Portfolio. Be the first to ask a question about Pioneering Portfolio Management. 0 likes. While it’s a popular model, it isn’t the only show in town. "-Page 136 "In mean-variance optimization, data on expected returns provide the most powerful determinant of results, demanding the greatest share of quantitative modelers’ attention. It was also full of blow-up stories. David Swensen is manager of Yale University's endowment fund where he's generated returns in the range of 16% annually the past couple decades. That is, security prices tend to fluctuate more than necessary to respond to fundamental factors, such as earnings and interest rates, that determine intrinsic value. I also enjoyed Swensen’s open antagonism of credit (corporate credit, high yield credit, non-US sovereign credit, and even asset backed or structured credit) as an asset class. Real Estate Investment Trusts (REITs) are comprised of companies that own income-producing real estate assets. It's actually fairly clear to see the principles that should (in principle) underlie one's own personal portfolio allocation decisions, while also providing insight into the eagle's eye view institutional investors take when making their decisions. David Swensen Teaches Asset Management Students About "The Yale Model" January 13, 2020 . There’s more money than certified talent in the world of investing, so outstanding investment managers have many choices because so many investors want to be their clients. This book repeats itself so often that 100 pages could be trimmed easily from it. The LP favors a bond allocation of 70% while using small-cap stocks to increase its upside. David F. Swensen is the chief investment officer of Yale University and the bestselling author of Pioneering Portfolio Management. Pioneering Portfolio Management. (source: Nielsen Book Data) What Is the Swensen Portfolio. Pay for patience in the timber arena contrasts with the depletion characteristic of oil and gas investments.". Still, the Swensen model is nearly dummy-proof and an excellent way for the lazy investor to limit risk while maximizing returns. The bond allocation itself is split evenly between US Treasury bonds and TIPs. Second, with his splendid book Pioneering Portfolio Management. As I did with the Ivy 5, I’ll lay out the standard “Swensen Six” model and then expand it to make use of the Tranche Model. The Swensen Portfolio is one of the most copied investment models in the world. The Yale Endowment manages billions of dollars and invests in all kinds of exotic assets only available to large institutions. The Larry Portfolio (LP) has become fashionable for those looking to limit their potential downside even further. Within bonds, he splits it evenly at 15% between TIPS (Treasury Inflation-protected securities) and US Treasury Bonds. This book is very insightful and the author proposed some practical problems in the asset management industry. Within emerging markets, you’ll want to diversify and not put all your eggs in one basket. When you buy through links on our site, we may earn an affiliate commission. He attempts to diversify it with an asset allocation combining the total stock market, international stocks, emerging markets, intermediate bonds, and real estate in the form of REITs. If you like the idea of an all-inclusive portfolio but prefer an alternative asset allocation to the Swensen model, the Larry portfolio, All-Weather portfolio, and Golden Butterfly portfolio are great substitutes. It made me consider macro risks I had never thought about before and suggested ways to hedge them. Since the 1970s, REITs have averaged nearly an 11% return. Pioneering Portfolio Management. The Swensen Portfolio is an attractive alternative if you’re looking to diversify further than a traditional 60/40 stock/bond mix. Goodreads helps you keep track of books you want to read. If everyone could achieve 16% returns year over year, nobody would bother investing any other way. An indispensable roadmap for creating a successful investment program from Yale’s chief investment officer, David F. Swensen. He is responsible for managing and investing the University's endowment assets and investment funds, which total $23.9 billion. David Swensen is the President and Chief Investment Officer of Yale’s endowment. I thought it overall was a pretty good book, but the writing style left a little to be desired. The Swensen Portfolio is well diversified; you shouldn’t have those gut-wrenching drops investors feel with a 100% stock portfolio. Like TIPs, real estate increases when inflation rises so they also do well as a hedge. While he doesn’t dive too deep into the weeds, or go into Yale’s portfolio in too much length, he does provide a lot of helpful commentary on his own views. During a bear market, treasury bonds and TIPs will likely outperform (along with the bond market as a whole). History has shown that for a retiree, a 30/70 portfolio rising to a 70/30 portfolio has less volatility and risk than a portfolio that begins and ends with a 60/40 split. It’s unrealistic to expect the same returns produced by Yale’s endowment portfolio. The Swensen Portfolio: How You Can Copy the Yale Model at Home, Replicating the Swensen Portfolio with M1 Finance. If owning a single piece of real estate is like owning stock from a single company, REITs are like owning a mutual fund. The Swensen Portfolio is the easiest way for individual investors to copy the world-famous Yale Model. Risk-averse investors may want to hold a combination of the model portfolio and cash, which will reduce overall risk," Swensen says. Pioneering Portfolio Management is probably considered the closest thing to a textbook one could find in the field of Investment Management. While David Swensen does not make specific ticker recommendations in his book, Unconventional Success, he describes the asset classes sufficiently to where we can easily find ETFs that fit his recommended asset classes. kind of basic and boring, doesnt say anything novel or give any real insightful ideas. Download. During his fourteen years as Yale's chief investment officer, David F. Swensen has transformed the management of the university's portfolio. First half is very good explanation of diversified investing and asset allocation. 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