Money-Rx Blog

He also holds Fellowships at the Brookings Institution, Berkeley College and the International Center for Finance, is a trustee at TIAA and the Carnegie Institution, a non-executive director at Schroders plc., and treasurer at the Hopkins Committe of trustees.

In addition, he is a participating researcher in the Hedge Fund Research Initiative, a joint collaboration between leading scholars from Yale, MIT and other Universities partnered with hedge fund managers. He is also the author of two best selling books on investment finance and has served as an advisor to the New York Stock Exchange and the states of Connecticut and Massachusetts, along with other foundations.

Education: B.A., B.S., University of Wisconsin, River Falls, 1975

Ph.D. Economics, Yale, 1980

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Career: Salomon Brothers, 1979-1982

Senior Vice President, Lehmann Brothers, 1982-1985

Adjunct Professor of Finance & Chief Investment Officer, Yale University, 1985-To date

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Books: Pioneering Portfolio Management: An Unconventional Approach to Institutional Investment, First Publication 2000, Free Press (updated & revised edition July 22, 2008).

Unconventional Success: A Fundamental Approach to Personal Investment, 2005, Free Press.

Investment Policy, Paperback, Oct 1994, co-authored with Charles D. Ellis and others, ISBN 1-879087-42-1

Yale Endowment: When he joined Yale, the Endowment Fund stood at $1.3 billion in 1986. Today it has crossed $22.5 billion. David Swensen has helped grow the fund by 17.2% in the last 10 years, with a 28% gain for 2006-2007, a $4.5 billion gain from $18 to $22.5 billion. He has accomplished this primarily by moving away from traditional investments in stocks and bonds, instead diversifying the portfolio with alternative investments like hedge funds and commodities like oil, along with private company investments. His work at the Yale Endowment led him and Dean Takahashi to develop the Yale Model, which divides a portfolio into five or six equally sized asset classes, with heavier exposure to private equity funds and foreign investments. The Yale Model is discussed in detail in his book Pioneering Portfolio Management.

Opinion: David Swensen currently recieves an annual compensation of $1.3 million, a paltry figure compared to the $50 million+ take home pay of prominent hedge fund managers. While he could easily land a high paying position on Wall Street, Swensen shuns the limelight and prefers to focus on building on his research and work at Yale. He feels more comfortable where his work, and its fruits, are applied to solving global problems and financial aid for education. A for-profit job, he feels, would entail using his talents to help make wealthy people wealthier. He has an idealistic streak, and says he wanted to be a United States Senator from Wisconsin. When he left Lehmann Brothers to join Yale, he also accepted an 80% paycut. Today, with an unparalleled reputation as an investment manager, he is highly sought after by money managers trying to catch his eye, since an investment from the Yale Endowment generates tremendous market buzz about a company.

His strategy involves spotting a growth sector in the economy and hanging on to it, rather than timing the market. The second aspect of his job involves hiring the right asset managers. While spotting trends in the economy is a science, the hiring of efficient managers is more of an art, and David Swensen is gifted with a talent for both. He oversees a team of around 100 highly dedicated asset managers who have the same loyalty to Yale and a similar vision of enhancing the purchasing power of the Yale Endowment so to be able to do more for those in need of financial aid.

He is also highly critical about mutual funds with loads. He cites the conflict of interest mutual funds try to balance, between corporate profits and returns to investors, and suggests investors should stick, if necessary, with not-for-profit mutual funds without loads. His second book Unconventional Success describes in great detail how the odds are stacked against individual investors, and in favor of money managers. If anything, his investing philosophy can be said to be a guide for the ordinary investor.

An area of concern regarding his investments is the lack of transparency and the secrecy surrounding the Yale Endowment. While other Universities have been more open, Swensen cites performance issues as a reason for not disclosing investments. This has led to a general suspicion that Yale is investing in areas and countries which other Universities avoid based on ethical criteria.

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David Swensen is divorced, with three children, and lives in New Haven, Connecticut.

Reference Links: http://mba.yale.edu/faculty/profiles/swensen.shtml