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Pioneering Portfolio Management: An Unconventional Approach to Institutional Investment
During his fourteen years as Yale's chief investment officer, David F. Swensen has transformed the management of the university's portfolio. Largely by focusing on nonconventional strategies, including a heavy allocation to private equity, Swensen has achieved an annualized return of 16.2 percent, which has propelled Yale's endowment into the top tier of institutional funds. Now, this acknowledged leader of fund managers draws on his experience and deep knowledge of the financial markets to provide a compendium of powerful investment strategies. Swensen presents an overview of the investment world populated by institutional fund managers, pension fund fiduciaries, investment managers, and trustees of universities, museums, hospitals, and foundations. He offers penetrating insights from his experience managing Yale's endowment, ranging from broad issues of goals and investment philosophy to the strategic and tactical aspects of portfolio management. Swensen's exceptionally readable book addresses critical concepts such as handling risk, selecting investment advisers, and negotiating the opportunities and pitfalls in individual asset classes. Fundamental investment ideas are illustrated by real-world concrete examples, and each chapter contains strategies that any manager can put into action. At a time when it is becoming increasingly difficult to cope with the relentless challenges provided by today's financial markets, Swensen's book is an indispensable roadmap for creating a successful investment program for every institutional fund manager. Any student of markets will benefit from Pioneering Portfolio Management.
364 pages, Hardcover
First published May 15, 2000
514 people are currently reading
3968 people want to read
About the author
David F. Swensen
5 books126 followersDavid F. Swensen (born 1954) has been the Chief Investment Officer at Yale University since 1985. He is responsible for managing and investing the University's endowment assets and investment funds, which total $23.9 billion. Realizing an average annual return of 11.8 percent on his investments over the ten years to 2009, Swensen's consistent track record has attracted the notice of Wall Street portfolio managers. He is notable for inventing The Yale Model which is an application of modern portfolio theory. Swensen was listed third on aiCIO's 2012, a list of the 100 most influential institutional investors worldwide
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Displaying 1 - 30 of 64 reviews
March 11, 2020
This book reads like an college financial studies textbook, very dry and colorless. I would recommend this to anyone working directly in the field of finance or active fund management. However, for the rest of us investors, the content is a bit much. There is a good amount of time dedicated to the specifics of running a large endowment, including how to treat fund managers, reviewing past endowments, and other specific things that do not apply to the every day investor.
If you want an overview of what Swensen did at Yale and exactly how he balanced the endowment, I would honestly just recommend reading articles about his model. Good summary articles include the NPR story "Yale's Money Guru Shares Wisdom with Masses" from 2006, or the "Invest like a Yalie" article written in Dec. 2019. I'm trying to save you guys some time here, this book is work.
If you want an overview of what Swensen did at Yale and exactly how he balanced the endowment, I would honestly just recommend reading articles about his model. Good summary articles include the NPR story "Yale's Money Guru Shares Wisdom with Masses" from 2006, or the "Invest like a Yalie" article written in Dec. 2019. I'm trying to save you guys some time here, this book is work.
June 1, 2025
This book was a helpful resource on how to think like an institutional investor from a titan in the field. 25 years after publication many of the ideas continue to be relevant. However, ideas such as relative risk and reward attributes of the different asset classes and survivorship bias are part of the conventional wisdom and were more reminders than novel insights from this book. One area that was new and interesting was the discussion on matching the assets to the liabilities in the context of an educational endowment and the frameworks around the purpose of the endowment and the interaction with the educational institution. With the current upheaval in funding for higher education this is a topic that is becoming increasingly topical, in terms of what is the appropriate role of the endowment and what it can and cannot do, in addition to the normative assessment of what it should be used for. One aspect that had less applicability to the present is the detailed performance metrics. These statistics were useful for understanding the thinking at the time but the level of precision was not needed for understanding the historic context.
I also found Swensen to be too critical of fixed income investments. Fixed income provides benefits beyond just diversification and insurance and there is a case to be made for more of a continuum between stocks and bonds that he seemed to dismiss. In addition, there was not enough engagement with the greater contractual rights afforded to bondholders compared to an equity holder and the significant value that these rights can have in certain scenarios and market environments. He did make a compelling case for what is perhaps his most famous conclusion, that endowments are well served by targeting alternative assets. The discussion of all asset classes was also complemented by a cogent and persuasive discussion on the areas where active management could add value and how to assess that added value.
Overall, while dated and occasionally repetitive, this book was a helpful reminder of investment principles for determining asset allocation and security selection and provided a new lens with which to view endowments.
I also found Swensen to be too critical of fixed income investments. Fixed income provides benefits beyond just diversification and insurance and there is a case to be made for more of a continuum between stocks and bonds that he seemed to dismiss. In addition, there was not enough engagement with the greater contractual rights afforded to bondholders compared to an equity holder and the significant value that these rights can have in certain scenarios and market environments. He did make a compelling case for what is perhaps his most famous conclusion, that endowments are well served by targeting alternative assets. The discussion of all asset classes was also complemented by a cogent and persuasive discussion on the areas where active management could add value and how to assess that added value.
Overall, while dated and occasionally repetitive, this book was a helpful reminder of investment principles for determining asset allocation and security selection and provided a new lens with which to view endowments.
February 23, 2016
Favorite quote from the book: “[S]uccssful investment cultures encourage professionals to find new mistakes to make, instead of simply repeating old errors.†(page 304)
Originally published in 2000, Swensen updated his classic work on institutional investments early this year. Swensen’s writing is very systematic, which can be expected from the Chief Investment Officer for Yale University. He begins by exploring the reasons for endowments and the necessity of an appropriate polices for spending and investments. After establishing a base level of understanding in these areas, he delves into a detailed outline of asset allocation and asset classes. Much of this material (especially his work on equity and bond investments) is also covered in his book, Unconventional Success: A Fundamental Approach to Personal Investing, which I reviewed last year. However, there are numerous differences between the goals and the approaches of an individual and of institutional investors. Non-profit institutional investors, for whom the book is written, don’t have to work about the tax consequences in the same way an individual investor must consider them. Another major difference is the expanded number of assets available to institutional investors. Such institutions have a longer time horizons, the available resources for managing such investments and large amounts which allows them to expand into new categories which include more illiquid investments. By moving into alternative investments, an institution can hedge their investments. Swensen goes into such investments, which make up a significant portion of Yale’s portfolio. These investments include natural resources such as oil, gas and timber, commercial real estate, private equity, venture capital and investment buyouts pools.
Instead of providing a “how-to†manual, Swensen focuses on investment philosophy. The institution’s investment policy is a tool to maintain an appropriate risk level for investments, by spreading investments around to hedge from a massive loss in one particular sector or class. Institutions need to have a policy that outlines assets allocations and then the discipline to do regular rebalancing of the portfolio to maintain allocation targets. As one investment rises in price and begins to claim a larger percentage of the investment, Swensen advice is to sell and reap profits, while reinvesting in those areas in which the portfolio is down. Such “contrarian thinkingâ€, according to Swensen, is the best way to “buy low and sell high.†Swensen tells the story of insisting on a firm hand at Yale in the aftermath of the 1987 crash. After the stock market had a major loss, most people pulled money out of the market and put it into bonds. Yale did the opposition and reaped big gains in the months afterwards, when the markets recovered.
Swensen recommends that for investments in “efficient markets†(such as many of the equity markets in the United States, Europe and Japan) one employ a passive investment strategy. Efficient markets are those in which financial conditions are shared and well-known and in which the market is free to correct over or underpriced securities. Passive investments are tied to indexes (such as the S&P 500) and have much lower fees than their active counterparts. Swensen’s observation, backed by massive amounts of data, is that active management in efficient markets seldom benefits the investors. Active management cost more and the fees often eat up any profit generated from the manager’s strategies.
However, Swensen acknowledges the role of active investment in inefficient markets. More complicated investments require an active strategy. Alternative investments such as hedge funds, real estate and natural resources, along with emerging markets all require specialized knowledge and insight which can only be gained by employing active managers. I found his chapter on Alternative Asset Classes to be the most enlightening in the book. Not only does Swensen outline each type of investment, he explains the liquidity and fee structures for each type of investment as well as how the interest of the investors aligns with the manager of the funds and with other participating parties.
This book provides an investor with many questions to ask managers. He explains fee structures, which are often unfair to the investor and what one should be on the lookout for. He explains topics such as “survivorship bias†and “backfill bias†which often skews an index’s performance. He suggests that one good way to insure a good active managers in the world of private equity is to find one who has a significant “co-investment†(as related to their net worth), meaning that if manager benefits, everyone will benefit. Too often, as he points out, due to fee schedules, an investment can flounder while the managers thrive. Swensen also explains how, especially in the bond market, powerful forces aligned against the investor. As he did in Unconventional Success, he recommends staying away from corporate bonds. However, he does provide an understanding into the various categories of such bonds.
This book came out in February 2009. I wish Swensen had waited and updated it based on the economic crisis of late 2008. Unfortunately, nothing is mentioned of the crisis with the exception of a brief discussion of the tightening in the credit markets in late 2007. I’m sure this book is not for everyone. It can be very academic; however, occasionally the reader is treated to a glimpse of his dry humor.
Originally published in 2000, Swensen updated his classic work on institutional investments early this year. Swensen’s writing is very systematic, which can be expected from the Chief Investment Officer for Yale University. He begins by exploring the reasons for endowments and the necessity of an appropriate polices for spending and investments. After establishing a base level of understanding in these areas, he delves into a detailed outline of asset allocation and asset classes. Much of this material (especially his work on equity and bond investments) is also covered in his book, Unconventional Success: A Fundamental Approach to Personal Investing, which I reviewed last year. However, there are numerous differences between the goals and the approaches of an individual and of institutional investors. Non-profit institutional investors, for whom the book is written, don’t have to work about the tax consequences in the same way an individual investor must consider them. Another major difference is the expanded number of assets available to institutional investors. Such institutions have a longer time horizons, the available resources for managing such investments and large amounts which allows them to expand into new categories which include more illiquid investments. By moving into alternative investments, an institution can hedge their investments. Swensen goes into such investments, which make up a significant portion of Yale’s portfolio. These investments include natural resources such as oil, gas and timber, commercial real estate, private equity, venture capital and investment buyouts pools.
Instead of providing a “how-to†manual, Swensen focuses on investment philosophy. The institution’s investment policy is a tool to maintain an appropriate risk level for investments, by spreading investments around to hedge from a massive loss in one particular sector or class. Institutions need to have a policy that outlines assets allocations and then the discipline to do regular rebalancing of the portfolio to maintain allocation targets. As one investment rises in price and begins to claim a larger percentage of the investment, Swensen advice is to sell and reap profits, while reinvesting in those areas in which the portfolio is down. Such “contrarian thinkingâ€, according to Swensen, is the best way to “buy low and sell high.†Swensen tells the story of insisting on a firm hand at Yale in the aftermath of the 1987 crash. After the stock market had a major loss, most people pulled money out of the market and put it into bonds. Yale did the opposition and reaped big gains in the months afterwards, when the markets recovered.
Swensen recommends that for investments in “efficient markets†(such as many of the equity markets in the United States, Europe and Japan) one employ a passive investment strategy. Efficient markets are those in which financial conditions are shared and well-known and in which the market is free to correct over or underpriced securities. Passive investments are tied to indexes (such as the S&P 500) and have much lower fees than their active counterparts. Swensen’s observation, backed by massive amounts of data, is that active management in efficient markets seldom benefits the investors. Active management cost more and the fees often eat up any profit generated from the manager’s strategies.
However, Swensen acknowledges the role of active investment in inefficient markets. More complicated investments require an active strategy. Alternative investments such as hedge funds, real estate and natural resources, along with emerging markets all require specialized knowledge and insight which can only be gained by employing active managers. I found his chapter on Alternative Asset Classes to be the most enlightening in the book. Not only does Swensen outline each type of investment, he explains the liquidity and fee structures for each type of investment as well as how the interest of the investors aligns with the manager of the funds and with other participating parties.
This book provides an investor with many questions to ask managers. He explains fee structures, which are often unfair to the investor and what one should be on the lookout for. He explains topics such as “survivorship bias†and “backfill bias†which often skews an index’s performance. He suggests that one good way to insure a good active managers in the world of private equity is to find one who has a significant “co-investment†(as related to their net worth), meaning that if manager benefits, everyone will benefit. Too often, as he points out, due to fee schedules, an investment can flounder while the managers thrive. Swensen also explains how, especially in the bond market, powerful forces aligned against the investor. As he did in Unconventional Success, he recommends staying away from corporate bonds. However, he does provide an understanding into the various categories of such bonds.
This book came out in February 2009. I wish Swensen had waited and updated it based on the economic crisis of late 2008. Unfortunately, nothing is mentioned of the crisis with the exception of a brief discussion of the tightening in the credit markets in late 2007. I’m sure this book is not for everyone. It can be very academic; however, occasionally the reader is treated to a glimpse of his dry humor.
December 25, 2021
David Swensen, Chief Investment Officer of the best performing endowment in US (Yale University) explains his unorthodox view on how to make asset allocation for a long term. I really liked the part where Swesen explained in detail what is important in a process of private equity and venture capital managers selection. This is a superior book for those who are interested in institutional portfolio management, as it describes all the necessary aspects of portfolio constrution in a detailed manner. P.s. Since the book is quite long (400 pages) in order to optimize the time for reading this book I personally recommend to skip two initial chapters on Endowment Purpose and and Spending goals (as it is relevant only for endowments, but not for other type of institutional portfolios)
February 29, 2020
My fav quotes (not a review):-Page 11 |"The sixth secret is that, as Charles Darwin tried to explain, survival of the fittest is not determined by competitive strength, but rather by social desirability. 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. Given their freedom of choice, managers prefer to work for and with clients they like and admire, and they like and admire David Swensen very much."-Page 43 |"The high risk, high return investment policy best suited to serve asset preservation conflicts with the low risk, low return investment approach more likely to produce stable distributions to the operating budget."-Page 90 |"Yale economist Robert Shiller argues that markets exhibit excess volatility. 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. In other words, if price movements were rescaled down…so as to be less variable, then price would do a better job of forecasting fundamentals.” Shiller’s self-described “controversial claim” provides “evidence of a failure of the efficient markets model.” Anyone attempting to understand October 1987’s market crash from a fundamental perspective sees merit in Shiller’s position."-Page 135 "Thoughtful investors strike a balance between respect for history and concern for analytical consistency."-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. Forecasts of variances place second in importance, while assumptions regarding correlations prove least crucial."-Page 143 "Real estate constitutes the core of Yale’s real assets portfolio with a weight of 50 percent."-Page 144 "Timber investments round out the real assets trio. Although timber shares the characteristic of inflation sensitivity with real estate and oil and gas, because timber plays less of a role in the general economy, timber prices exhibit less correlation with general price levels. Financially astute timber owners manage holdings on a sustainable basis, cutting the amount of wood produced each year through biological growth. When managed on a sustainable basis, the productive capacity of the forest remains intact, preserving value across generations. Sustainable forest management does not require lockstep harvesting of a single year’s biological growth. If timber prices appear to be relatively low, the cutting program can be curtailed, deferring current year harvests to future years. In fact, the forestland owner receives a bonus in the form of an additional year’s biological growth as the payment for patience. Pay for patience in the timber arena contrasts with the depletion characteristic of oil and gas investments."
-Page 145
"In fact, inefficiencies in pricing of real assets argue for higher expected returns, suggesting parity in return expectations for real assets and for stocks and leading to an assumption of 6 percent real returns."
-Page 146
"Misuse of Mean-Variance Optimization Despite mean-variance optimization’s potential for making a positive contribution to portfolio structuring, dangerous conclusions result from poorly considered forecasts. Some of the most egregious errors committed with mean-variance analysis involve inappropriate use of historical data. Consider allocations to real estate in the late 1980s. Real estate provided extremely strong returns during the 1980s with relatively low volatility and relatively low correlation to traditional marketable securities. Not surprisingly, naïve application of mean-variance analysis led to recommendations of extraordinary allocations to real estate."
-Page 157
"The tendency of markets for risky assets to move together in times of crisis reduces the value of diversification, at least in the short run."
-Page 169
"At June 30, 2005, the university’s $29.4 billion investment pool supported long positions of $49.7 billion offset by short positions of $20.3 billion."
-Page 205
"Unless foreign currency positions constitute more than 20 percent or 25 percent of portfolio assets, currency exposure serves to reduce overall portfolio risk."
-Page 229
"Survivorship bias presents a pervasive problem for gatherers of historical return data."
-Page 231
"In cases where funds steer clear of market risk, investors without skill deserve to earn only money-market levels of return."
-Page 232
"Perhaps the most blatant example of hedge fund exposure to market forces lies in the long-only manager that simply establishes a private partnership, calls it a hedge fund, and charges a 20 percent profits interest."
-Page 235
"Investors find coincidence of interests only in those situations where the absolute return manager invests substantial personal assets side-by-side with investor monies."
-Page 286
"Yale pioneered the use of absolute return as an asset class, first employing it in 1990. As of June 30, 2007, inception-to-date returns clocked in at 13.2 percent per annum, with a standard deviation of only 4.9 percent (relative to the Wilshire "5000’s 11.2 percent return and 14.0 percent standard deviation)."
-Page 289
"Keynes likens active investment to children’s entertainment: “For it is, so to speak, a game of Snap, of Old Maid, of Musical Chairs—a pastime in which he is the victor who says snap neither too soon nor too late, who passes the Old Maid to his neighbor before the game is over, who secures a chair for himself when the music stops."
-Page 290
"Conversely, in public perception, poor results follow from lack of ability. Market participants rarely wonder whether high returns came from accepting greater than market risk, or whether low returns resulted from lower than market risk."
-Page 297
"The best investors care about risk. Diligence and hard work take an investment manager only so far, as even the most carefully researched decisions ultimately face the vicissitudes of market forces. Because so much lies beyond a portfolio manager’s control, superior investors seek to know as much as can be known, limiting uncertainty to the irreducible minimum."
-Page 298
"Over time, markets will do extraordinary, even bizarre, things. A single, big mistake could wipe out a long string of successes. We therefore need someone genetically programmed to recognize and avoid serious risks, including those never before encountered."
-Page 298
"Certain perils that lurk in investment strategies cannot be spotted by use of the models commonly employed today by financial institutions."
-Page 304
"the parachute troops are more entrepreneurial than the tank battalions. We want to make lightning raids in Zimbabwe and Ghana and Egypt while your partners…are holding meetings to decide… "
-Page 352
"Worldly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionally.”
-Page 379
"If the institution fails in its unusual approach, the policy will likely be abandoned and the investment staff will likely be unemployed. In contrast, had the institution failed with a standard institutional portfolio, policies may still be abandoned, but investment professionals would likely remain gainfully, if not happily, employed."
-Page 384
"Ironically, Silber’s positive assessment of Seragen’s science appears well-founded. The firm’s major drug, Interleukin-2, received FDA approval in February 1999. Yet the university stands to accrue little benefit from the drug’s commercial success as Boston University’s economic interest in the project diminished greatly with the Ligand takeover. Seragen’s progress came too late and cost too much to reward the firm’s shareholders."
-Page 386
"Portfolio return data provide essential hard input into the performance assessment process. By comparing manager returns to passive market benchmarks and active manager benchmarks, investors measure the successes and failures of an investment program. Sensible investors look beyond the basic return data to understand the risks associated with the portfolios that generated the returns."
-Page 396
"Adjusting portfolio returns for risk plays at best a supporting role in performance evaluation. Managers tend to avoid discussing risk, unless explaining poor relative performance, as in “we did worse than the market, but we did it with less risk.”
-Page 145
"In fact, inefficiencies in pricing of real assets argue for higher expected returns, suggesting parity in return expectations for real assets and for stocks and leading to an assumption of 6 percent real returns."
-Page 146
"Misuse of Mean-Variance Optimization Despite mean-variance optimization’s potential for making a positive contribution to portfolio structuring, dangerous conclusions result from poorly considered forecasts. Some of the most egregious errors committed with mean-variance analysis involve inappropriate use of historical data. Consider allocations to real estate in the late 1980s. Real estate provided extremely strong returns during the 1980s with relatively low volatility and relatively low correlation to traditional marketable securities. Not surprisingly, naïve application of mean-variance analysis led to recommendations of extraordinary allocations to real estate."
-Page 157
"The tendency of markets for risky assets to move together in times of crisis reduces the value of diversification, at least in the short run."
-Page 169
"At June 30, 2005, the university’s $29.4 billion investment pool supported long positions of $49.7 billion offset by short positions of $20.3 billion."
-Page 205
"Unless foreign currency positions constitute more than 20 percent or 25 percent of portfolio assets, currency exposure serves to reduce overall portfolio risk."
-Page 229
"Survivorship bias presents a pervasive problem for gatherers of historical return data."
-Page 231
"In cases where funds steer clear of market risk, investors without skill deserve to earn only money-market levels of return."
-Page 232
"Perhaps the most blatant example of hedge fund exposure to market forces lies in the long-only manager that simply establishes a private partnership, calls it a hedge fund, and charges a 20 percent profits interest."
-Page 235
"Investors find coincidence of interests only in those situations where the absolute return manager invests substantial personal assets side-by-side with investor monies."
-Page 286
"Yale pioneered the use of absolute return as an asset class, first employing it in 1990. As of June 30, 2007, inception-to-date returns clocked in at 13.2 percent per annum, with a standard deviation of only 4.9 percent (relative to the Wilshire "5000’s 11.2 percent return and 14.0 percent standard deviation)."
-Page 289
"Keynes likens active investment to children’s entertainment: “For it is, so to speak, a game of Snap, of Old Maid, of Musical Chairs—a pastime in which he is the victor who says snap neither too soon nor too late, who passes the Old Maid to his neighbor before the game is over, who secures a chair for himself when the music stops."
-Page 290
"Conversely, in public perception, poor results follow from lack of ability. Market participants rarely wonder whether high returns came from accepting greater than market risk, or whether low returns resulted from lower than market risk."
-Page 297
"The best investors care about risk. Diligence and hard work take an investment manager only so far, as even the most carefully researched decisions ultimately face the vicissitudes of market forces. Because so much lies beyond a portfolio manager’s control, superior investors seek to know as much as can be known, limiting uncertainty to the irreducible minimum."
-Page 298
"Over time, markets will do extraordinary, even bizarre, things. A single, big mistake could wipe out a long string of successes. We therefore need someone genetically programmed to recognize and avoid serious risks, including those never before encountered."
-Page 298
"Certain perils that lurk in investment strategies cannot be spotted by use of the models commonly employed today by financial institutions."
-Page 304
"the parachute troops are more entrepreneurial than the tank battalions. We want to make lightning raids in Zimbabwe and Ghana and Egypt while your partners…are holding meetings to decide… "
-Page 352
"Worldly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionally.”
-Page 379
"If the institution fails in its unusual approach, the policy will likely be abandoned and the investment staff will likely be unemployed. In contrast, had the institution failed with a standard institutional portfolio, policies may still be abandoned, but investment professionals would likely remain gainfully, if not happily, employed."
-Page 384
"Ironically, Silber’s positive assessment of Seragen’s science appears well-founded. The firm’s major drug, Interleukin-2, received FDA approval in February 1999. Yet the university stands to accrue little benefit from the drug’s commercial success as Boston University’s economic interest in the project diminished greatly with the Ligand takeover. Seragen’s progress came too late and cost too much to reward the firm’s shareholders."
-Page 386
"Portfolio return data provide essential hard input into the performance assessment process. By comparing manager returns to passive market benchmarks and active manager benchmarks, investors measure the successes and failures of an investment program. Sensible investors look beyond the basic return data to understand the risks associated with the portfolios that generated the returns."
-Page 396
"Adjusting portfolio returns for risk plays at best a supporting role in performance evaluation. Managers tend to avoid discussing risk, unless explaining poor relative performance, as in “we did worse than the market, but we did it with less risk.”
June 17, 2024
The definitive Bible of my industry but heavens was this book boring as fuck!! There are some nice case studies sprinkled in there and the occasional insightful analysis, but aside from these, much of this book reads like a prosaic encyclopedia of asset classes. And just when you think you’re through the thick of this asset class catalogue, he hits you in the Appendix with his scathing ‘Impure Fixed Income!’
A big question mark for me is: who was this book written for? On one hand, he footnotes an explainer of what the yield curve is, then on the other hand, he delves into 6 pages of details on soft dollars. On the latter point though, my favorite theme underlying this entire book is understanding where the interests of various parties lay - very important in an industry full of snakes!
All this said though, Swensen was a legend and may he rest in peace. Thank you for your service!
PS - A special shoutout to the gentleman on the subway beginning his Swensen journey as I was winding mine down. I hope you’re on this website and see this review.
A big question mark for me is: who was this book written for? On one hand, he footnotes an explainer of what the yield curve is, then on the other hand, he delves into 6 pages of details on soft dollars. On the latter point though, my favorite theme underlying this entire book is understanding where the interests of various parties lay - very important in an industry full of snakes!
All this said though, Swensen was a legend and may he rest in peace. Thank you for your service!
PS - A special shoutout to the gentleman on the subway beginning his Swensen journey as I was winding mine down. I hope you’re on this website and see this review.
February 2, 2023
i p much skimmed this for a week idk why ig i learned that colleges r just massive hedge funds/investment portfolios that dabble in education on the side
November 27, 2014
This is a book detailing many strategies that can be employed with endowment and pension management as well as describing which are often or sometimes the best fit for a situation. I thought it overall was a pretty good book, but the writing style left a little to be desired. It was about as engaging as a textbook.
Regarding endowments, I thought his comments regarding the time frame for it was interesting. Is it intended to last forever, or is it intended on having a set lifetime? Also, is the amount of money withdrawn a vital input into a budget, or is there some flexibility regarding the rate of withdrawals? Each can influence the type of risk that you are willing to take on. Also, is it a onetime large grant of money, or is there a stream of donations that can be increased with some prodding? “By preserving endowment assets adjusted for inflation, the institution retains the ability to ‘support the same set of activities that it is now supporting.’ In supplying a stable flow of resources for operations, the endowment provides continuity of support, avoiding disruptive interruptions in distributions to academic programs.” (26) Those that benefit from the endowment also need to have stable and reasonable expectations. “Even though market swings cause institutions to feel alternately poor and rich, sensible portfolio managers base investment and spending decisions on assumptions regarding long-term capital market characteristics.” (37)
He then talks about how “Investment returns stem from decisions regarding three tools of portfolio management: asset allocation, market timing, and security selection.” (50) He thinks asset allocation is important, but does not advocate relying solely on mean-variance analysis for determining the optimal allocation. He thinks it’s important to have a target and make sure to rebalance to ensure you maintain your optimal levels. He describes some traditional asset classes, including US Equities, US Treasury Bonds, Foreign Developed Equity, and Emerging Market Equity. While Yale and other large school endowments use these, they like alternative asset classes more than many other investors. These include absolute return investments, real assets (including real estate and timber), and private equity. “Private assets, including venture capital, leveraged buyouts, real estate, timber, and oil and gas, which barely register among the broad group of educational institutions and account for less than 10 percent of assets, play an important role for the major endowments with an allocation of 40 percent. Disciplined quantitative modeling techniques encourage investors to create well-diversified portfolios.” (127)
He then talks about asset class management and the investment process. He repeatedly talks about the importance of hiring good managers with established methodologies to manage funds. With active management, a lot depends on the manager, so it is important to hire good ones. He prefers smaller funds where employees get paid based on the results, and no other shareholders are involved to dilute the earnings. This decreases the incentives for them to go somewhere else or start their own firm. He also doesn’t like fund of funds because their benefits don’t often outweigh the costs in his estimation. He also favors small groups being involved with decisions. “Better decisions come from small internal decision-making groups consisting of no more than three or four people. As the number of people involved in a decision increases, the likelihood of a conventional, compromising consensus increases.” (302) It’s also important to constantly be monitoring the funds and ensuring that they are staying on course and not dramatically shifting their style. “Informed relationship management requires ongoing performance evaluation, incorporating both qualitative and quantitative factors. Monitoring the quality and commitment of a firm’s principals plays a central role in assessing the ability of an organization to achieve excellence. Other significant issues include fidelity to investment principles and maintenance of an appropriate organizational structure. Regular face-to-face meetings between fund managers and external advisors constitute the most important tool for performance evaluation.” (326) He also puts a lot of value in comparing performance to benchmarks when analyzing returns. In the appendix, he talks about how he prefers the risk/return characteristics to US Government bonds to corporate bonds and international bonds.
Overall, this was a book that provided a lot of great information about a topic that I didn’t know a ton about. The writing style was challenging at times, and definitely quite literally put me to sleep on more than one occasion, but it is a fairly thorough explanation of the perspectives of one of the best portfolio managers out there.
Regarding endowments, I thought his comments regarding the time frame for it was interesting. Is it intended to last forever, or is it intended on having a set lifetime? Also, is the amount of money withdrawn a vital input into a budget, or is there some flexibility regarding the rate of withdrawals? Each can influence the type of risk that you are willing to take on. Also, is it a onetime large grant of money, or is there a stream of donations that can be increased with some prodding? “By preserving endowment assets adjusted for inflation, the institution retains the ability to ‘support the same set of activities that it is now supporting.’ In supplying a stable flow of resources for operations, the endowment provides continuity of support, avoiding disruptive interruptions in distributions to academic programs.” (26) Those that benefit from the endowment also need to have stable and reasonable expectations. “Even though market swings cause institutions to feel alternately poor and rich, sensible portfolio managers base investment and spending decisions on assumptions regarding long-term capital market characteristics.” (37)
He then talks about how “Investment returns stem from decisions regarding three tools of portfolio management: asset allocation, market timing, and security selection.” (50) He thinks asset allocation is important, but does not advocate relying solely on mean-variance analysis for determining the optimal allocation. He thinks it’s important to have a target and make sure to rebalance to ensure you maintain your optimal levels. He describes some traditional asset classes, including US Equities, US Treasury Bonds, Foreign Developed Equity, and Emerging Market Equity. While Yale and other large school endowments use these, they like alternative asset classes more than many other investors. These include absolute return investments, real assets (including real estate and timber), and private equity. “Private assets, including venture capital, leveraged buyouts, real estate, timber, and oil and gas, which barely register among the broad group of educational institutions and account for less than 10 percent of assets, play an important role for the major endowments with an allocation of 40 percent. Disciplined quantitative modeling techniques encourage investors to create well-diversified portfolios.” (127)
He then talks about asset class management and the investment process. He repeatedly talks about the importance of hiring good managers with established methodologies to manage funds. With active management, a lot depends on the manager, so it is important to hire good ones. He prefers smaller funds where employees get paid based on the results, and no other shareholders are involved to dilute the earnings. This decreases the incentives for them to go somewhere else or start their own firm. He also doesn’t like fund of funds because their benefits don’t often outweigh the costs in his estimation. He also favors small groups being involved with decisions. “Better decisions come from small internal decision-making groups consisting of no more than three or four people. As the number of people involved in a decision increases, the likelihood of a conventional, compromising consensus increases.” (302) It’s also important to constantly be monitoring the funds and ensuring that they are staying on course and not dramatically shifting their style. “Informed relationship management requires ongoing performance evaluation, incorporating both qualitative and quantitative factors. Monitoring the quality and commitment of a firm’s principals plays a central role in assessing the ability of an organization to achieve excellence. Other significant issues include fidelity to investment principles and maintenance of an appropriate organizational structure. Regular face-to-face meetings between fund managers and external advisors constitute the most important tool for performance evaluation.” (326) He also puts a lot of value in comparing performance to benchmarks when analyzing returns. In the appendix, he talks about how he prefers the risk/return characteristics to US Government bonds to corporate bonds and international bonds.
Overall, this was a book that provided a lot of great information about a topic that I didn’t know a ton about. The writing style was challenging at times, and definitely quite literally put me to sleep on more than one occasion, but it is a fairly thorough explanation of the perspectives of one of the best portfolio managers out there.
January 19, 2019
Favorite quote from the book: “[S]uccssful investment cultures encourage professionals to find new mistakes to make, instead of simply repeating old errors.” (page 304)
Originally published in 2000, Swensen updated his classic work on institutional investments early this year. Swensen’s writing is systematic, which should be expected from the Chief Investment Officer at Yale University. He begins by exploring the reasons for endowments and the necessity of appropriate polices for spending and investments. After establishing a base level of understanding in these areas, he delves into a detailed outline of asset allocation and asset classes. Much of this material (especially his work on equity and bond investments) is also covered in his book, Unconventional Success: A Fundamental Approach to Personal Investing, which I reviewed last year. However, there are numerous differences between the goals and the approaches of an individual and of institutional investors. Non-profit institutional investors, for whom the book is written, don’t have to worry about the tax consequences in the same way an individual investor must consider them. Another major difference is the expanded number of assets available to institutional investors. Such institutions have a longer time horizons, more available resources for managing alternative investments and larger amounts of cash to expand into such investments. By moving into alternative investments, an institution can hedge their positions to allow for growth while protecting their principle. Swensen goes into details on alternative investments, which make up a significant portion of Yale’s portfolio. These investments are more than just hedge funds and include natural resources such as oil, gas and timber, commercial real estate, private equity, venture capital and investment buyouts pools.
Instead of providing a “how-to” manual, Swensen focuses on investment philosophy. The institution’s investment policy is a tool to help maintain an appropriate risk level for investments, by spreading investments around to hedge from a massive loss in one particular sector or class. Institutions need to have a policy that outlines assets allocations and then the discipline to do regular rebalancing of the portfolio to maintain allocation targets. As one investment rises in price and begins to claim a larger percentage of the investment pool, Swensen advises to sell and reap profits, while reinvesting in those areas in which the portfolio is down. Such “contrarian thinking”, according to Swensen, is the best way to “buy low and sell high.” Swensen tells the story of insisting on a firm hand at Yale in the aftermath of the 1987 crash. After the stock market had a major loss, most people pulled money out of the market and put it into bonds. Yale did the opposite and reaped big gains in the months afterwards, when the markets recovered.
Swensen recommends that for investments in “efficient markets” (such as many of the equity markets in the United States, Europe and Japan) one employ a passive investment strategy. Efficient markets are those in which financial conditions are shared and well-known and in which the market is free to correct over or under priced securities. Passive investments are tied to indexes (such as the S&P 500) and have much lower fees than their active counterparts. Swensen’s observation, backed by massive amounts of data, is that active management in efficient markets seldom benefits the investors. Active management cost more and the fees often eat up any profit generated from the manager’s strategies.
However, Swensen acknowledges the role of active investment in inefficient markets (such as emerging markets, hedge funds, etc). More complicated investments require an active strategy. Alternative investments such as hedge funds, real estate and natural resources, along with emerging markets all require specialized knowledge and insight which can only be gained by employing active managers. I found his chapter on Alternative Asset Classes to be the most enlightening in the book. Not only does Swensen outline each type of investment, he explains the liquidity and fee structures for each type of investment as well as how the interest of the investors aligns with the manager of the funds and with other participating parties. He also exposes many myths, such as showing how (even in their heyday) hedge funds were not as attractive as we were lead to believe due to "survivorship bias" and that the top venture capital and private equity funds are mostly closed to new investments, requiring new investors to accept lesser quality funds if they are interested in investing in these arenas.
This book provides an investor with many questions to ask managers. He explains fee structures, which are often unfair to the investor and what one should be on the lookout for. He explains topics such as “survivorship bias” and “backfill bias” which often skews an index’s performance. He suggests that one good way to insure a good active managers in the world of private equity is to find one who has a significant “co-investment” (as related to their net worth), meaning that if manager benefits, everyone will benefit. Too often, as he points out, due to fee schedules, an investment can flounder while the managers thrive. Swensen also explains how, especially in the bond market, powerful forces aligned against the investor. As he did in Unconventional Success, he recommends staying away from corporate bonds. However, he does provide an understanding into the various categories of such bonds.
This book came out in February 2009. I wish Swensen had waited and updated it based on the economic crisis of late 2008. Unfortunately, nothing is mentioned of the crisis with the exception of a brief discussion of the tightening in the credit markets in late 2007. I’m sure this book is not for everyone. I also wish he would have included more on taxes non-profits have to pay such as excise taxes. The book is academic; however, occasionally the reader is treated to a glimpse of his dry humor.
Originally published in 2000, Swensen updated his classic work on institutional investments early this year. Swensen’s writing is systematic, which should be expected from the Chief Investment Officer at Yale University. He begins by exploring the reasons for endowments and the necessity of appropriate polices for spending and investments. After establishing a base level of understanding in these areas, he delves into a detailed outline of asset allocation and asset classes. Much of this material (especially his work on equity and bond investments) is also covered in his book, Unconventional Success: A Fundamental Approach to Personal Investing, which I reviewed last year. However, there are numerous differences between the goals and the approaches of an individual and of institutional investors. Non-profit institutional investors, for whom the book is written, don’t have to worry about the tax consequences in the same way an individual investor must consider them. Another major difference is the expanded number of assets available to institutional investors. Such institutions have a longer time horizons, more available resources for managing alternative investments and larger amounts of cash to expand into such investments. By moving into alternative investments, an institution can hedge their positions to allow for growth while protecting their principle. Swensen goes into details on alternative investments, which make up a significant portion of Yale’s portfolio. These investments are more than just hedge funds and include natural resources such as oil, gas and timber, commercial real estate, private equity, venture capital and investment buyouts pools.
Instead of providing a “how-to” manual, Swensen focuses on investment philosophy. The institution’s investment policy is a tool to help maintain an appropriate risk level for investments, by spreading investments around to hedge from a massive loss in one particular sector or class. Institutions need to have a policy that outlines assets allocations and then the discipline to do regular rebalancing of the portfolio to maintain allocation targets. As one investment rises in price and begins to claim a larger percentage of the investment pool, Swensen advises to sell and reap profits, while reinvesting in those areas in which the portfolio is down. Such “contrarian thinking”, according to Swensen, is the best way to “buy low and sell high.” Swensen tells the story of insisting on a firm hand at Yale in the aftermath of the 1987 crash. After the stock market had a major loss, most people pulled money out of the market and put it into bonds. Yale did the opposite and reaped big gains in the months afterwards, when the markets recovered.
Swensen recommends that for investments in “efficient markets” (such as many of the equity markets in the United States, Europe and Japan) one employ a passive investment strategy. Efficient markets are those in which financial conditions are shared and well-known and in which the market is free to correct over or under priced securities. Passive investments are tied to indexes (such as the S&P 500) and have much lower fees than their active counterparts. Swensen’s observation, backed by massive amounts of data, is that active management in efficient markets seldom benefits the investors. Active management cost more and the fees often eat up any profit generated from the manager’s strategies.
However, Swensen acknowledges the role of active investment in inefficient markets (such as emerging markets, hedge funds, etc). More complicated investments require an active strategy. Alternative investments such as hedge funds, real estate and natural resources, along with emerging markets all require specialized knowledge and insight which can only be gained by employing active managers. I found his chapter on Alternative Asset Classes to be the most enlightening in the book. Not only does Swensen outline each type of investment, he explains the liquidity and fee structures for each type of investment as well as how the interest of the investors aligns with the manager of the funds and with other participating parties. He also exposes many myths, such as showing how (even in their heyday) hedge funds were not as attractive as we were lead to believe due to "survivorship bias" and that the top venture capital and private equity funds are mostly closed to new investments, requiring new investors to accept lesser quality funds if they are interested in investing in these arenas.
This book provides an investor with many questions to ask managers. He explains fee structures, which are often unfair to the investor and what one should be on the lookout for. He explains topics such as “survivorship bias” and “backfill bias” which often skews an index’s performance. He suggests that one good way to insure a good active managers in the world of private equity is to find one who has a significant “co-investment” (as related to their net worth), meaning that if manager benefits, everyone will benefit. Too often, as he points out, due to fee schedules, an investment can flounder while the managers thrive. Swensen also explains how, especially in the bond market, powerful forces aligned against the investor. As he did in Unconventional Success, he recommends staying away from corporate bonds. However, he does provide an understanding into the various categories of such bonds.
This book came out in February 2009. I wish Swensen had waited and updated it based on the economic crisis of late 2008. Unfortunately, nothing is mentioned of the crisis with the exception of a brief discussion of the tightening in the credit markets in late 2007. I’m sure this book is not for everyone. I also wish he would have included more on taxes non-profits have to pay such as excise taxes. The book is academic; however, occasionally the reader is treated to a glimpse of his dry humor.
August 19, 2011
kind of basic and boring, doesnt say anything novel or give any real insightful ideas. however, the various stories and examples of other funds he tells are really interesting. i would rather read a sort of "tell all" kind of book from him (or just as good, this same book written today, after their endowment fund debacles of the past few years).
dude is also in love with keynes, which in turn makes me question everything written in the book, including things i already agreed with.
dude is also in love with keynes, which in turn makes me question everything written in the book, including things i already agreed with.
December 24, 2024
3 Summarizing Thoughts:
1) Funny but not surprising that in the midst of a dry, 400 page overview of Swensen’s heavily academic & analytical frameworks, the motif that kept surfacing was “partner with extraordinary people”
2) Operate within a framework that is extremely disciplined, yet allows for creative liberties, exploration, and new (but safe) mistake-making
3) Be early to new paradigms (Swensen’s paradigm was alternatives, namely private equity, in the mid 80s)
1) Funny but not surprising that in the midst of a dry, 400 page overview of Swensen’s heavily academic & analytical frameworks, the motif that kept surfacing was “partner with extraordinary people”
2) Operate within a framework that is extremely disciplined, yet allows for creative liberties, exploration, and new (but safe) mistake-making
3) Be early to new paradigms (Swensen’s paradigm was alternatives, namely private equity, in the mid 80s)
March 1, 2010
Swensen's views on asset allocation are a useful check against an investment view of specific investments within an asset class. The best lesson I learned from this book was the importance of asset allocation in addition to great investment idea generation.
June 22, 2023
I appreciated the insights this book shared, like how even some (many?) institutions are not great at active management. Giving it four stars because it had lots of material that is not as relevant to non-institutional investors. That being said, it was well written.
January 2, 2020
Swensen's book ranges from a dry, almost textbook-like description of the mechanics of portfolio assembly to gory war stories of greed and mismanagement. 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.
The single most useful thing I learned is that active management really can work, at least if you're Yale. I'm not convinced it would work for me personally, but Swensen has provided a clear picture about why and how it worked for him, both in terms of portfolio diversification and excess returns. As of 2019 Yale has an impressive 61% of its fund in private equity and hedge funds as of 2019, with only 2.75% in domestic equity, and this book explains why.
I found chapters 4–8 most directly relevant to the things I was interested in: portfolio construction, how to work with different asset classes, and understanding the incentives of financial firms.
Some interesting ideas:
—"the most important distinction in the investment world does not separate individuals and institutions; the most important distinction divides those investors with the ability to make high quality active management decisions from those investors without active management expertise."
—"Investment returns stem from decisions regarding three tools of portfolio management: asset allocation, market timing, and security selection." (In a way this is obvious but it's nice to have a clean list of the three tools)
—Don't take asset classes for granted. For example, "fixed income" is not a reasonable asset class in terms of security behavior. Traditional treasuries behave very differently from TIPS, and corporate debt is its own beast.
—Mean-variance optimization is still the mental model to use for portfolio optimization.
—Timberland is surprisingly uncorrelated to equities while producing equity-like returns.
—Active management does work for inefficiently priced asset classes, but only top tier managers will produce worthwhile returns and finding them is a challenge. Conversely, be very suspicious of long-market strategies for efficiently priced asset classes.
—Three words govern investor-manager relationships and fee structures: Principal agent problem. He believes alignment of interests can be improved but will never be perfect.
—Excess returns come from risk-taking and contrarianism, so creating an environment where risk-taking is rewarded is essential. This is difficult to achieve in larger funds.
The single most useful thing I learned is that active management really can work, at least if you're Yale. I'm not convinced it would work for me personally, but Swensen has provided a clear picture about why and how it worked for him, both in terms of portfolio diversification and excess returns. As of 2019 Yale has an impressive 61% of its fund in private equity and hedge funds as of 2019, with only 2.75% in domestic equity, and this book explains why.
I found chapters 4–8 most directly relevant to the things I was interested in: portfolio construction, how to work with different asset classes, and understanding the incentives of financial firms.
Some interesting ideas:
—"the most important distinction in the investment world does not separate individuals and institutions; the most important distinction divides those investors with the ability to make high quality active management decisions from those investors without active management expertise."
—"Investment returns stem from decisions regarding three tools of portfolio management: asset allocation, market timing, and security selection." (In a way this is obvious but it's nice to have a clean list of the three tools)
—Don't take asset classes for granted. For example, "fixed income" is not a reasonable asset class in terms of security behavior. Traditional treasuries behave very differently from TIPS, and corporate debt is its own beast.
—Mean-variance optimization is still the mental model to use for portfolio optimization.
—Timberland is surprisingly uncorrelated to equities while producing equity-like returns.
—Active management does work for inefficiently priced asset classes, but only top tier managers will produce worthwhile returns and finding them is a challenge. Conversely, be very suspicious of long-market strategies for efficiently priced asset classes.
—Three words govern investor-manager relationships and fee structures: Principal agent problem. He believes alignment of interests can be improved but will never be perfect.
—Excess returns come from risk-taking and contrarianism, so creating an environment where risk-taking is rewarded is essential. This is difficult to achieve in larger funds.
April 12, 2023
Unsure what Swensen is trying to achieve thru this book. Unsure of his intended audience too - institutional or individual? I can tell that he's holding back a lot too, not revealing the 'secret sauce' - an observation echoed by people such as Charley Ellis. For example, actually shedding some more light on Yale's actual day-to-day process, risk control, and positions would be helpful.
Could sniff Swensen's academic background thru this book - which actually leads me to be skeptical of some of his methods, notably the heavily top-down and mean-variance analysis policy methods he employs. The book is essentially a primer on nearly all the asset classes out there. Even Swensen himself somewhat lazily defines expected returns and expected risk as - historical premiums? Do all top down guys drive with the rear view mirror? How do you fit the entire portfolio construction just by going with historical means and variances? Interesting question I pondered was whether a bottom up guy can manage an endowment/ foundation, with their perpetual view of the portfolio.
Swensen then proceeds to spend probs around a fifth of the book drilling down to the reader the vitality of unconventional thinking. I wonder if this gospel that is now so prevalent and 'common sense' in the literature now, was formalized back then.
4 stars for Swensen's clarity. Fun fact that I didn't know about him was that he structured the world's first currency swap.
Could sniff Swensen's academic background thru this book - which actually leads me to be skeptical of some of his methods, notably the heavily top-down and mean-variance analysis policy methods he employs. The book is essentially a primer on nearly all the asset classes out there. Even Swensen himself somewhat lazily defines expected returns and expected risk as - historical premiums? Do all top down guys drive with the rear view mirror? How do you fit the entire portfolio construction just by going with historical means and variances? Interesting question I pondered was whether a bottom up guy can manage an endowment/ foundation, with their perpetual view of the portfolio.
Swensen then proceeds to spend probs around a fifth of the book drilling down to the reader the vitality of unconventional thinking. I wonder if this gospel that is now so prevalent and 'common sense' in the literature now, was formalized back then.
4 stars for Swensen's clarity. Fun fact that I didn't know about him was that he structured the world's first currency swap.
February 13, 2023
This was an absolutely outstanding book. In clear, easily comprehensible prose, Swensen gives a master class in long term investing. To be sure, he points out that his objectives are those of an immortal, tax free, investor and so are not exactly the same as those of an individual, but he nonetheless illuminates many important investment principles that apply to every saver. He also skewers any number of Wall Street (and Silicon Valley) sacred cows. The book might best be read immediately after "More Money than God," "The Power Law" and any book about private equity. He absolutely destroys the logic for the great majority of investors for investing in anything other than market neutral private vehicles and makes an extremely strong case for focusing primarily on asset allocation and rebalancing as the main tools for long term investing. It's a great great book.
May 24, 2020
Excelente livro. Leitura obrigatória para quem faz gestão de recursos de terceiros e deseja proceder da maneira mais séria e responsável possível.
Acho que a maior contribuição do Swensen está em indicar o que deve ser evitado pelo investidor e o que demanda muito cuidado. Ele também é muito claro ao apontar o que funciona bem para grandes fundos e que não funciona nem um pouco para quem faz gestão de valores menores, sendo Venture Capital um dos principais exemplos.
O texto, por mais claro que seja, é denso e demanda atenção constante do leitor.
Acho que a maior contribuição do Swensen está em indicar o que deve ser evitado pelo investidor e o que demanda muito cuidado. Ele também é muito claro ao apontar o que funciona bem para grandes fundos e que não funciona nem um pouco para quem faz gestão de valores menores, sendo Venture Capital um dos principais exemplos.
O texto, por mais claro que seja, é denso e demanda atenção constante do leitor.
May 25, 2021
Textbook-like content. As a newbie in finance, it was very difficult to grasp everything the author conveys. After reading 50% of the book, I started to get into the flow of the density of content. The legendary investor David Swenson has offered his wide and deep knowledge about the asset management industry including various agency problems that emerged in every aspect of the investment partnership. I highly respect his independent thinking and integrity which has also helped yield great returns for Yale endowment.
September 6, 2017
花了三個lecture的時間讀了這本被譽為機構投資的聖經，主要也是因為6009的教科書可能選的太簡單了…對於finc專業數一數二的難課，BKM的投資學還是顯得太寬泛了…
Swensen自己管理的耶魯大學校友會捐贈基金，連續三十年超高的回報率得益於把防禦永遠放在投資理念的第一位，通過蒙特卡羅模擬取得最佳協方差結果，避免市場給組合帶來損失。
在賽馬心態短期投資充斥基金市場的情況下，利用三大投資組合管理工具，資產配置，擇時和證券選擇來控制組合收益，同時強調風險分散化的重要性，rebalance, active investment 和控制槓桿。
每一章都有豐富的案例闡述，例如金字塔頂端風險基金Kleiner Perkins。強調逆向投資，另一方面劇烈的轉型可能帶來失敗，世界上最著名的空頭法斯巴赫兄弟等。最後還介紹了組合里可以互補的另類資產tips.fund of funds等等。
可能等真正管理基金之後再來讀這本書會更有啓發，不過感覺可能很難有這個機會了…
Swensen自己管理的耶魯大學校友會捐贈基金，連續三十年超高的回報率得益於把防禦永遠放在投資理念的第一位，通過蒙特卡羅模擬取得最佳協方差結果，避免市場給組合帶來損失。
在賽馬心態短期投資充斥基金市場的情況下，利用三大投資組合管理工具，資產配置，擇時和證券選擇來控制組合收益，同時強調風險分散化的重要性，rebalance, active investment 和控制槓桿。
每一章都有豐富的案例闡述，例如金字塔頂端風險基金Kleiner Perkins。強調逆向投資，另一方面劇烈的轉型可能帶來失敗，世界上最著名的空頭法斯巴赫兄弟等。最後還介紹了組合里可以互補的另類資產tips.fund of funds等等。
可能等真正管理基金之後再來讀這本書會更有啓發，不過感覺可能很難有這個機會了…
March 17, 2018
Overall very solid book. 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. I found his descriptions of the incentive structures of small vs large managers, and of his claim that all fixed income other than treasuries is “impure fixed income” particularly fascinating.
April 18, 2021
Some very interesting insights in this book though I am not the intended audience. Those financial professionals who deal with institutional investments will probably rate this book one or two stars higher than I did. I still found it to be worthwhile reading and am glad to have picked it up. I might now look at reading his book for individual investors, "Unconventional Success: A Fundamental Approach to Personal Investment."
July 3, 2022
I read this for a class on investment management. A good read for anyone who works with endowments or wonders how universities invest their money. Swensen describes the strategy he used when he was in charge of investing the Yale endowment, which was much "riskier" than other universities. But, he achieved very high returns that enabled Yale to ascend quickly in terms of funding and resources. Also describes how some universities mismanaged their endowments, which was interesting.
July 12, 2025
This book is about a guy who managed Yale University endowment of multiple billion dollars. It is about the endowment purposes, investment and spending goals, investment philosophy, asset allocation, portfolio management, traditional and alternative asset classes, investment advisers, performance assessment and investment process. It is a book from which I do not remember much, therefore I cannot give it more than 3 stars.
February 12, 2026
Pioneering Portfolio Management reads more academic than anything, yet its lessons have meaningfully expanded my understanding of a field I have only recently entered. Several topics that left an impact include his perspective on interpersonal relationships with fund mangers and the intricacies of an effective due diligence process. All in all, there are plenty of gems in this one.
December 3, 2018
This book is very insightful and the author proposed some practical problems in the asset management industry. It is very helpful, not only for beginners but also for experienced investment professionals.
This book is definitely worthwhile to be read again.
This book is definitely worthwhile to be read again.
September 4, 2021
The most interesting part of the book for me was learning about failures and reading about some of the conflicts of interest inherent in the financial industry. Lots of good content here, but generally difficult to read.
March 5, 2022
An excellent overview of finance. I particularly like the perspective of how a university endowment invests for the indefinite future, as opposed to individuals investing for a lifetime, and how it affects their investment decisions
June 21, 2023
Tedious, textbook-like work, but certainly informative. Prepare for a flurry of examples and repetitive definitions. A good reference for those learning about investing techniques, just a bit of a bore. I struggled to finish this book.
September 13, 2024
Some chapters were a very helpful overview of how endowments work at educational institutions. Others (maybe most) are specifically for active investors and not as helpful for laymen, although as a fundraiser I thought the investment committee sections were interesting also.
January 20, 2025
The topics are hard to understand for most, and Swenson does not help in his writing style, but it is effective. Repeat, repeat, repeat... But its the only way I could understand so it is what it is
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