David Swenson CFO for Yale's endowment's lecture to a Yale ECON class

[Kel]

Nice you tube lecture...

http://www.youtube.com/watch?feature=pl ... tSlRK0SZoM

Financial Markets (ECON 252)

David Swensen, Yale's Chief Investment Officer and manager of the University's endowment, discusses the tactics and tools that Yale and other endowments use to create long-term, positive investment returns. He emphasizes the importance of asset allocation and diversification and the limited effects of market timing and security selection. Also, the extraordinary returns of hedge funds, one of the more recent phenomena of portfolio management, should be looked at closely, with an eye for survivorship and back-fill biases.

00:00 - Chapter 1. Introduction: Changing Institutional Portfolio Management
03:59 - Chapter 2. Asset Allocation: The Power of Diversification
16:44 - Chapter 3. Balancing the Equity Bias into Sensible Diversification
20:48 - Chapter 4. The Emotional Pitfalls of Market Timing
32:58 - Chapter 5. Survivorship and Backfill Biases in Security Selection
43:17 - Chapter 6. Finding Value Investing Opportunities as an Active Manager
49:02 - Chapter 7. Yale's Portfolio and Results
54:48 - Chapter 8. Questions on New Investments, Remaining Bullish, and Time Horizons

Complete course materials are available at the Open Yale Courses website: http://open.yale.edu/courses

[Storm]

I heard this guy interviewed on NPR and I must say he is a very wise manager.  He talked about how they diversify their investments across several asset types, and simply rebalance, and by doing this they are always buying low and selling high.  Very PP-like in his investment behavior, although I do believe Yale might have gotten caught up in a little bit of the MBS fallout of 2008.

[melveyr]

Thanks for the link!

He does a great passive management sales pitch and then proceeds to come off as a fairly active manager as the talk goes on. I think the students were catching on towards then end 

[craigr]

David Swensen's book Unconventional Success has a lot of good points in it mirrored by Harry Browne as well. His book was the only one I've read outside of Browne's that made the case for only owning Treasury bonds in a portfolio for instance.

[Kel]

some additional rambling 

What I thought was interesting is that this video reviews a  yale endowment type approach (also note Swensen’s talk takes place in spring 2008 just before yale endowment got sacked along with others) but what is particularly interesting is how it compares to a risk parity approach and permanent portfolio approach as in the video from Mebane Faber that someone posted under the permanent portfolio discussion.

I understand Risk parity means asset allocation but where you leverage the low risk assets so that their standard dev is equivalent to the highest risks assets (or deleverage higher risk assets). Ray Dalio head of Bridgewater the biggest and probably most successful hedge fund manager in the world,  sort of pioneered this work (per Faber) for big institutions but in truth commodity CTAs have been doing this for a long time. Mebane Faber's Video explains things nicely and the cool part is the permanent portfolio is sort of a risk parity portfolio in it's own right although he says it's overweighted in treasuries ( he pools short and long together in this comment).

So the risk parity folks I suspect would say the Swenson portfolio (for individual investors)  is too heavy in stocks as an asset and thus there is more risk than they would be comfortable with ….although right now the Swenson portfolio is probably doing great since stocks are up quite a bit this year as an asset class.

Also of interest in Swensen's talk he cited research from a money flow perspective in which most investors lost money - even mutual funds that did very well over the long run as investors bought at the highs and got out at the lows - institutions were not much better than individual investors either.

Between both videos lots of good information.