The Ivy Portfolio: How to Invest Like the Top Endowments and Avoid Bear to Markets

by Mebane T. Faber, Eric W. Richardson

A do-it-yourself guide to investing like the renowned Harvard and Yale endowments."The Ivy Portfolio" shows step-by-step how to track and mimic the investment strategies of the highly successful Harvard and Yale endowments. Using the endowment Policy Portfolios as a guide, the authors illustrate how an investor can develop a strategic asset allocation using an ETF-based investment approach.

"The Ivy Portfolio" also reveals a novel method for investors to reduce their risk through a tactical asset allocation strategy to protect them from bear markets. The book will also showcase a method to follow the smart money and piggyback the top hedge funds and their stock-picking abilities. With readable, straightforward advice, "The Ivy Portfolio" will show investors exactly how this can be accomplished--and allow them to achieve an unparalleled level of investment success in the process.

With all of the uncertainty in the markets today, "The Ivy Portfolio" helps the reader answer the most often asked question in investing today - "What do I do"?

Genres: Finance, Business, Nonfiction, Personal Finance

240 pages, Hardcover

First published February 9, 2009

Reviews

[Linda · Rating 2 out of 5]

This book talks about a simple method tat is supposed to minimize risk while performing better than a simple "buy and old" of the S&P 500. On paper it sounds good but I could not reproduce his results.

His backtests used indices although he recommends implementing this with exchange traded funds. The problem is ETF's didn't exist until relatively recently so e couldn't backtest with them. When I tried backtesting with ETF's I didn't get very good results. There could be a lot of reasons for that (including my own mistakes) but I'd recommend that anyone planning to implement this do some testing first.

Although I think there is value in what he says I don't think that the practical history is there (as opposed to the theoretical history).

[Alan · Rating 4 out of 5]

After reading you may realize the incredible effort involved in getting a safe return of 16-18% on your money. Large endowments cannot be duplicated but it looks like they can be modelled closely with ETFs, with the exception of private equity.

[Josh · Rating 4 out of 5]

This book is a little odd. It starts off with: "here's what endowments do to beat market returns". Then, "as an individual, you can't do any of that, so here's a bunch of other random ideas completely unrelated to endowments."

Still, the research is good and the ideas are interesting.

[Dan Perik · Rating 4 out of 5]

Provided an interesting perspective on investing. While some of his points are valid, there are other factors that come into play as individual investors versus endowments. So some of his conclusions are helpful, but I would not take them 100%.

[Gary Stone · Rating 4 out of 5]

Great insight into how the Ivy league do it but not directly replicable by the ordinary investor. Gives some good ideas on how to use ETFs to come fairly close though.

[Dominik · Rating 3 out of 5]

Nice book about how US endowments invest their money.
First and most importantly, as an individual with less than bln in assets, you will not be able to replicate their results. Simply, some investments are available from a certain level of wealth.
But the author has for you a simplified version of the portfolio which is guaranteed to beat the market... interesting.
You can test the portfolio yourself by using free online tools:
https://www.portfoliovisualizer.com/b...
You can also find a great analysis of expected returns for the portfolio:
https://portfoliocharts.com/portfolio...
This portfolio did not age well. It underperformed the market and standard 60-40 portfolio since its inception. It had a good run after the 2000s but since 2009 it lagged the market significantly.
So the information in the book about the endowments is interesting and informative. But the portfolio part "aged like milk". You would be better in other portfolio types which you can research using the above links.
Finishing on a positive note; Appendix C and the bibliography are a treasure. They are themselves worth buying the book.

As a side note; Yale and Harward at beginning of 2022 had only 2.75% and 10.5% of their portfolios in US equities. It tells you something about their confidence in US stock market performance in the near future.

[Matt Innes · Rating 4 out of 5]

A book explaining how Harvard and Yale endowments invest their money. Much of the book explains why an individual investor cannot invest in the many of the same things, such as hedge funds and private equity. This somewhat undermines the purpose of the book. A reasonably workable diversified portfolio is outlined, but, as private equity and hedge funds are out, it ends up being fairly similar in asset allocation to, say, The Gone Fishin' Portfolio: Get Wise, Get Wealthy--And Get on with Your Life or How to Own the World: A Plain English Guide to Thinking Globally and Investing Wisely but none the worse for that. Also, the explanations of hedge funds and private equity are surprisingly comprehensive for such a book.

[Jodie · Rating 3 out of 5]

Good information on simple portfolios

If you’re a fan of quants and data driven investing, Meb Faber has to be on you reading list. In this book Meb looks at strategies employees by Ivy League endowments and how you can try to replicate them. Most surprising, the book also gives you multiple trend following, momentum, and relative strength based strategies which is a nice cherry on top.

I gave 3 stars because it’s not the easiest read. Because it is data driven, it can be a slug to get thorough and stay engaged. The data however is solid and should be read by anyone managing their own portfolio.

[Janie · Rating 4 out of 5]

Decent primer on how to allocate assets for someone with fairly little understanding about the subject. I didn’t find the focus on Ivy endowments particularly useful for individuals given we don’t have the same access to tax benefits, hedge funds, private equity, etc.

TLDR: spread your portfolio equally across the following: domestic stocks, foreign stocks, bonds, real estate, commodities

[Libby Andrews · Rating 3 out of 5]

Interesting to learn how Havard and Yale have created successful long term investment portfolios and how you csn do this yourself. There are a lot pf charts and explanations that I felt were fillers rather than essentiá reading, but nonetheless, I learnt from the book.

[Joseph · Rating 4 out of 5]

Very good read, though as with much investment literature, the methodology shared doesn't work so well anymore as it becomes common knowledge.

[Varun Juneja · Rating 5 out of 5]

Well worth the time and the money paid. Some really interesting takeaways.

[Justin · Rating 3 out of 5]

Much didn't seem applicable to small scale investors (e.g. private stocks)

[Sami · Rating 2 out of 5]

Ei tarjonnut hyvistä arvioistaan huolimatta oikeastaan mitään.

[Kenny Koh · Rating 4 out of 5]

Don't lose.

Portfolio allocation should be diversified among bonds equities hedge funds real estate private equity.

Tactical allocation - sell when price < SMA 10, buy when price > SMA 10

[SeanMc · Rating 4 out of 5]

Good book but not the financial approach that I chose.

[Kylewong · Rating 5 out of 5]

PART 1. IVY PORTFOLIO
OW alternatives
Table 2.1: Yale’s allocation
OW assets with low (or negative) correlation to the existing portfolio, e.g. real estate and HF
Table 2.2: Correlations among different asset classes
Table 2.6: expected return and risk
Table 2.7: dispersion of active management
The greatest dispersion of returns → active management is the most important
Real estate to hedge against inflation
Fixed income is the most efficient mkt (low return)

Table 3.1: Harvard’s allocation
Average sharpe ratio is 0.2 to 0.3, while a 60/40 stock/bond portfolio is around 0.4
Return of asset classes during high and low inflation (table 4.11)
Commodities perform well in inflationary environment because they are real assets.
20% of the stocks account for 80% of the gain


PART 2. TACTICAL ALLOCATION
Market timing
Method 1: momentum (using averages)
Method 2: rotation (investing in the top 2 best performing asset class in 3 months)

Tables in the file theIvyPortfolio in Winter 2013

[Jane · Rating 3 out of 5]

For me the best part of this book was Chapter 7 - "Winning by Not Losing." The best line starts on page 135 - "Buying asset classes for the long run is a good idea if you are a Sequoia tree, a giant tortoise, or an endowment, but individuals usually do not have a 20-year time frame to recover from large drawdowns." As a retired person, I definitely do not have 20 years to RECOVER although I may well have 20 plus years. Many writers and financial advisors do not seem to understand the difference or have any ideas on how to deal with it. As the line illustrates individuals are not endowments. That is the weakness of this book although it is very interesting to read how the "big boys" invest. I will be back testing the techniques in Chapter 7 to see if they could help me win by not losing.

[Daniel Oathout · Rating 5 out of 5]

I have read many investment books but this is a must read if you are serious about investing. The first half of the book is about the Yale and Harvard portfolios and performance. This is a good historical background for the rest of the book. The recommendations are backed up by extensive back testing over very long time periods. Back testing can be misleading if it is form fitted but there is no attempt to do that by these authors. Recommend this for someone looking for a method that makes good annual gains with low volatility.

[Alex · Rating 4 out of 5]

Tries to pack a little bit too much in here, but still worth a read for the discussion of tactical asset allocation. Key points here are blurred somewhat by its inclusion next to a broader overview of how endowments invest (which is mostly by strategic asset allocation), alternative investments, and hedge-fund cloning strategies.

[Cherif · Rating 5 out of 5]

Really interesting read. To my eyes, a thorough evaluation of the successful endowment investing methodology. But, I am left with a great deal of doubt that the portfolios expressed by Mr Faber can provide much advantage over other asset allocation strategies currently in vogue. Especially today, because so many seem to be chasing after returns in private equity and hedge funds.

[Pinotcanoz]

Excellent book for portfolio management. Data driven analysis for portfolio diversification and market entrance and exit timing. Theory used for Cambria's GTAA ETF. Results have been mixed compared to S&P since the 2010 ETF launch as a strategy of investing all asset in US stock was hard to beat due to QE cheap money.

[Matt Heavner · Rating 3 out of 5]

This book is a nice quick read, with some good ideas, some very good ideas, and a few "well, here is what those big funds do, but there is no way you can do it, but if you are a little crazy, here is how you can try to do it" moments. Overall, thought provoking and well worth the time to red it..

[Grace Appler · Rating 3 out of 5]

Good insights on endowment portfolio - essentially equal weighted diversifiers, and good insight that trend following outperforms buy-and-hold by avoiding losses. Doesn't address tax issue though so unclear if the timing strategy proposed here would work for taxable accounts.

[Michael · Rating 2 out of 5]

Sounds good in theory but then when you check his own results on his own ETFs (like $GAA) you see that he has been massively underperforming the market. Just buy a cheap diversified world-ETF like VT and don't bother.

[Scott Bell · Rating 5 out of 5]

Great book on a simple risk management strategy using ETFs. Huge influence on our practice at my firm.

[Joshua Rodning McIntyre · Rating 4 out of 5]

A good and easy to read guide for long-term investing. While I would approach a couple of things differently, overall this is a very helpful and insightful volume.

[Toomas · Rating 2 out of 5]

Terribly written. There are few practical tips and pointers to get started allocating assets, otherwise I'd give it a star. B skeptical before taking any advice from here. Analyze.

[VJ · Rating 4 out of 5]

This book is grt for passive investors. Good insight on building indexed portfolio.

[Dominic Mozel]

A first look at quantitative investing strategies