Sunday, October 08, 2006

Yale's Money Guru Shares Wisdom with Masses

This one is really good! It is an NPR piece on David Swensen who manages Yale's Endowment fund. While Swenson has done remarkably well, his basic strategy is easily replicated and fits very well with the idea of market efficiency and diversification taught in almost every finance class, although not as well as Swenson does it!

NPR : Yale's Money Guru Shares Wisdom with Masses:

On his relative success:
" Yale University recently announced a 23 percent return on its investments, swelling its endowment to a whopping $18 billion. The man behind that investment success is David Swensen, one of the most gifted investors in the world. He's made an average 16 percent annual return over 21 years..."
On market efficiency:
"He says for-profit mutual funds have an inherent conflict of interest. They make money by charging fees that suck profits away from investors in the funds. In fact, over time -- when you factor in the fees, taxes and other costs -- he says your odds of beating the market in an actively managed fund are less than one in 100."
On diversification:
"Swensen teaches a course at Yale in which he airs his unorthodox view of the basics of a well-diversified portfolio. He argues that, by owning not only stocks and bonds but also holdings in real estate, timber, oil and gas, and other investments, you can get strong returns with less overall risk."
Interesting piece with good advice that has the added benefit of audio as well!


Biomed Tim said...

I haven't listend to the interview yet but how are his views toward diversication considered "unorthodox?"

Do they teach some other sort of diversication in B-school?

Lord said...

Standard diversification is usually limited to stocks, bonds, and cash, a pretty meager universe.