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Vale David Swensen – Lessons from a pioneer of Endowment investing

Legendary but perhaps lesser-known investor David Swensen passed away earlier this month. Mr Swensen had been the CIO of the Yale University Endowment since 1985 – so over 35 years – and is credited with inventing an entirely different way of investing for institutions and specifically for Endowments.

During his tenure the Endowment at Yale grew from $1bn to over $30bn, with the value creation during this period over $45bn if all distributions paid to the University are included.

These returns far outstripped that of all other Universities and most institutional funds, many of whom were managing their portfolios on a more traditional 60/40 (equity/bonds) investment approach. Over time, many of these institutions attempted to replicate the Yale model, with varying levels of success.

Just as important as the total return generation of the Fund has been the provision of funding for the University across a variety of market environments. This funding has become increasingly critical to the University’s growth and success as the Endowment now provides one-third of the entire Yale University operating budget (as per 2020) which is a significant increase from 10% in 1985. This achievement is all the more remarkable given the massive growth in operating budgets and tuition fees in addition to the fact that the Endowment now provides financial aid for more than half of Yale’s students.

Read the full article here

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