Pioneering Portfolio Management: An Unconventional Approach to Institutional Investment, Fully Revised and Updated
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- Author：David F. Swensen
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Summary
An indispensable roadmap for creating a successful investment program from Yale’s chief investment officer， David F。 Swensen。
In the years since the now-classic Pioneering Portfolio Management was first published， the global investment landscape has changed dramatically -- but the results of David Swensen's investment strategy for the Yale University endowment have remained as impressive as ever。 Year after year， Yale's portfolio has trumped the marketplace by a wide margin， and， with over $20 billion added to the endowment under his twenty-three-year tenure， Swensen has contributed more to Yale's finances than anyone ever has to any university in the country。 What may have seemed like one among many success stories in the era before the Internet bubble burst emerges now as a completely unprecedented institutional investment achievement。
In this fully revised and updated edition， Swensen， author of the bestselling personal finance guide Unconventional Success， describes the investment process that underpins Yale's endowment。 He provides lucid and penetrating insight into the world of institutional funds management， illuminating topics ranging from asset-allocation structures to active fund management。 Swensen employs an array of vivid real-world examples， many drawn from his own formidable experience， to address critical concepts such as handling risk， selecting advisors， and weathering market pitfalls。
Swensen offers clear and incisive advice， especially when describing a counterintuitive path。 Conventional investing too often leads to buying high and selling low。 Trust is more important than flash-in-the-pan success。 Expertise， fortitude， and the long view produce positive results where gimmicks and trend following do not。
The original Pioneering Portfolio Management outlined a commonsense template for structuring a well-diversified equity-oriented portfolio。 This new edition provides fund managers and students of the market an up-to-date guide for actively managed investment portfolios。
In the years since the now-classic Pioneering Portfolio Management was first published， the global investment landscape has changed dramatically -- but the results of David Swensen's investment strategy for the Yale University endowment have remained as impressive as ever。 Year after year， Yale's portfolio has trumped the marketplace by a wide margin， and， with over $20 billion added to the endowment under his twenty-three-year tenure， Swensen has contributed more to Yale's finances than anyone ever has to any university in the country。 What may have seemed like one among many success stories in the era before the Internet bubble burst emerges now as a completely unprecedented institutional investment achievement。
In this fully revised and updated edition， Swensen， author of the bestselling personal finance guide Unconventional Success， describes the investment process that underpins Yale's endowment。 He provides lucid and penetrating insight into the world of institutional funds management， illuminating topics ranging from asset-allocation structures to active fund management。 Swensen employs an array of vivid real-world examples， many drawn from his own formidable experience， to address critical concepts such as handling risk， selecting advisors， and weathering market pitfalls。
Swensen offers clear and incisive advice， especially when describing a counterintuitive path。 Conventional investing too often leads to buying high and selling low。 Trust is more important than flash-in-the-pan success。 Expertise， fortitude， and the long view produce positive results where gimmicks and trend following do not。
The original Pioneering Portfolio Management outlined a commonsense template for structuring a well-diversified equity-oriented portfolio。 This new edition provides fund managers and students of the market an up-to-date guide for actively managed investment portfolios。
Reviews
Keven Wang
，
Great insights into how institutional investors think
Mark Zodda
，
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。" 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。" 。。。more
Daniel Souza
，
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 se 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。 。。。more
Dawei Liu
，
Pioneering Portfolio Management is probably considered the closest thing to a textbook one could find in the field of Investment Management。 Dave Swensen is a modern legend and though he might not admit it， the forefather of the dominant investment style found in endowments， foundations， and family offices around the world。 Much of what Mr。 Swensen details in this book are still quite relevant I found the writing style quite easy to read。 While he doesn’t dive too deep into the weeds， or go into Pioneering Portfolio Management is probably considered the closest thing to a textbook one could find in the field of Investment Management。 Dave Swensen is a modern legend and though he might not admit it， the forefather of the dominant investment style found in endowments， foundations， and family offices around the world。 Much of what Mr。 Swensen details in this book are still quite relevant I found the writing style quite easy to read。 While he doesn’t dive too deep into the weeds， or go into Yale’s portfolio in too much length， he does provide a lot of helpful commentary on his own views。 Though there is a lot of discussion that specifically relates to Yale， I think one could either skip those sections or read them to get a better sense of where Swensen is coming from。 I also enjoyed Swensen’s open antagonism of credit （corporate credit， high yield credit， non-US sovereign credit， and even asset backed or structured credit） as an asset class。 In some ways， I actually agree with him as historically equity markets are a far better place to get risk or beta to specific businesses， sectors， or markets， while more pure credit exposure can be expressed through treasuries。 （In particular I like how he classifies them all as “impure fixed income”） Furthermore， Swensen does actually dive into a variety of strategies， markets， and return streams。 One of my concerns or questions may be that Yale’s portfolio （due to its size） likely does not actually follow many of the tenets or philosophies that Swensen laid out decades ago。 Another thing that he does not spend much time on that would likely illustrate a large part of why endowments have outperformed has been their exposure to Venture Capital。 VC as a sub asset class （within Private Equity） have been an incredible engine of wealth creation and value creation that simply put， cannot be accessed by ordinary investors。 In particular， the best funds are not accessible for the vast majority of the institutional investors as well。 These funds have so consistently outperformed over decades and I am quite sure they’ve explained a lot of outperformance over this time frame。 Overall， this was not a dry or slow read and I would definitely recommend this book to both beginners and experts in this field。 。。。more
Alex
，
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 o 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。 。。。more
Danielle
，
It's a bit dry。 The big takeaway is to customize to your institution's needs。 People mistakenly think that they can just take this and apply it to a smaller endowment or one with different budgetary restrictions and goals。 This is not a turnkey solution but provides solid guideposts。 It's a bit dry。 The big takeaway is to customize to your institution's needs。 People mistakenly think that they can just take this and apply it to a smaller endowment or one with different budgetary restrictions and goals。 This is not a turnkey solution but provides solid guideposts。 。。。more
John Mcdonnell
，
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' 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。 。。。more
J。T。
，
Decent book to increase overall financial acumen but found the flow hard to follow。 The book title says it's for institutional investment but at times Swensen seems to go off into the retail/individual space。 Decent book to increase overall financial acumen but found the flow hard to follow。 The book title says it's for institutional investment but at times Swensen seems to go off into the retail/individual space。 。。。more
JimmiD
，
An excellent reference manual。 First chapter is really the most important。 What my ratings mean:5 – I felt this book was an exemplar in its genre/field。 That does not mean I agree with everything it says （or the moral of the story）。 It is likely to be a book that will change my thinking about a topic。4 – A very impressive book for its genre/field。 It probably didn’t change me or my thinking though。3 – An enjoyable way to spend the time reading it。2 – This was a pain to read。 It was probably diff An excellent reference manual。 First chapter is really the most important。 What my ratings mean:5 – I felt this book was an exemplar in its genre/field。 That does not mean I agree with everything it says （or the moral of the story）。 It is likely to be a book that will change my thinking about a topic。4 – A very impressive book for its genre/field。 It probably didn’t change me or my thinking though。3 – An enjoyable way to spend the time reading it。2 – This was a pain to read。 It was probably difficult to finish。1 – Life’s too short and/or I’m not smart enough to get the point of this book。 。。。more
Ning
，
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。
Roman Schuster
，
Very illuminating book - it gave a great macro overview of how university endowments should think about their portfolios， in terms of balancing the decisions of what percent of the endowment should be spent each year versus what the portfolio should be invested in to ensure preservation of purchasing power。 It made me consider macro risks I had never thought about before and suggested ways to hedge them。 It was also full of blow-up stories。 He spent a full two pages running Jim Cramer through th Very illuminating book - it gave a great macro overview of how university endowments should think about their portfolios， in terms of balancing the decisions of what percent of the endowment should be spent each year versus what the portfolio should be invested in to ensure preservation of purchasing power。 It made me consider macro risks I had never thought about before and suggested ways to hedge them。 It was also full of blow-up stories。 He spent a full two pages running Jim Cramer through the wringer too。 My only critique was that he warns the reader in earnest about the inherent flaw in using historical volatility as a measure of risk （a la Nassim Taleb）， then turns around and bases his entire capital allocation model on expected returns and expected volatility。 I understand that he 'modified' it to adjust for some biases he noted， and threw in the warnings， showing that he knows as well as anyone that return volatility is a crap shoot in the short run， but it still rubbed me the wrong way。 Wish I could give it 4。5 stars， but I'm rounding down。 Fantastic book。 。。。more
KevinLee
，
It's a great book！ Swensen taught me how to do investment in the right way。 It's a great book！ Swensen taught me how to do investment in the right way。 。。。more
Akhil Jain
，
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 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。” 。。。more
Henry Barry
，
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。
Bowen Zhong
，
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…
Jeff Garrison
，
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 spend 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。 。。。more
Kevin
，
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 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。 。。。more
Bulent
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best
Emil Petersen
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En meget grundig gennemgang af investeringsprincipper og overordnede investeringsmuligheder for institutioner。 Handler en del om management og udvælgelse af personale osv。 Ikke en bog jeg har tænkt mig at genlæse umiddelbart。 De samme pointer er lavet andetsteds og en del kortere！ Vil dog mene jeg er for unuanceret til fuldstændigt at forstå de pointer Swensen giver i bogen。 Den er forholdsvist avanceret。
Michael Berges
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First half is very good explanation of diversified investing and asset allocation。 Second half gets very wonkish and he kind of starts speaking out of both sides of the mouth。 The appendix is all about fixed income but isn't considered an actual chapter， which seemed very strange。 First half is very good explanation of diversified investing and asset allocation。 Second half gets very wonkish and he kind of starts speaking out of both sides of the mouth。 The appendix is all about fixed income but isn't considered an actual chapter， which seemed very strange。 。。。more
Sean
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This book lays out fundamentals of portfolio management from the perspective of one of the most successful and credible practitioners in the market: David Swensen of Yale's Endowment。 Swensen discusses the three tools of portfolio management: 1） asset allocation -- responsible for ~90% of portfolio returns 2） market timing -- mostly a fool's game， and 3） security selection -- contingently appropriate dependent on the strategy and time horizon。 Swensen advises appropriately to maintain an equity This book lays out fundamentals of portfolio management from the perspective of one of the most successful and credible practitioners in the market: David Swensen of Yale's Endowment。 Swensen discusses the three tools of portfolio management: 1） asset allocation -- responsible for ~90% of portfolio returns 2） market timing -- mostly a fool's game， and 3） security selection -- contingently appropriate dependent on the strategy and time horizon。 Swensen advises appropriately to maintain an equity bias and follow diversification principles。 His book echoes similar themes to texts by Charlie Ellis， someone else in the investment profession whom I admire。 He and Charlie argue that market players routinely overpay for liquidity -- so an investor should maintain holdings in relatively illiquid securities to capture extra returns。 And liquidity only exists when you need it least -- consider the air pocket of liquidity in 1987 during the October crash or 1998 during the Russian debt crisis。 Swensen also references famed value investors in arguing that margin of safety depends on the price paid and references the importance of Tobin's q for investors。 Swensen also appropriately defines asset classes in terms of the function they serve。 For instance， bond provide insurance against deflation and flight to quality。 Given that function， TIPS， or Treasury Inflation Protection Securities， make little sense in a traditional fixed income mandate given that TIPS underperform in periods of deflation。 Nevertheless， many managers bucket TIPS together as part of fixed income mandates， an inappropriate classification when one focuses on the function of the asset class。 Consider the function of an investment and when evaluating strategies or managers， investigate the sector， style， or size bias and any hidden leverage。 Also understand the investment process well; do not just look at historical performance figures。 Moreover， beware excessive diversification， especially when hiring active managers -- you will eventually find a portfolio that effectively mimics and index fund while underperforming after layering on so many fees and other transactions costs。 Finally， think long-term and adopt contrarian thinking。 Overall， this book deserves a read and re-read。 。。。more
Ricardo Viana
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O livro é uma das publicações essenciais para quem quer conhecer a gestão de recursos de longo prazo。 Há um destaque muito interessante para os investimentos alternativos。 O autor defende （muito bem） que esses têm papel fundamental para o alcance das metas。Outra boa notícia é que， em 2014， o autor foi publicado no Brasil: "Desbravando a Gestão de Portfólios - uma abordagem não convencional para o investimento institucional"， Bei Editora。 O livro é uma das publicações essenciais para quem quer conhecer a gestão de recursos de longo prazo。 Há um destaque muito interessante para os investimentos alternativos。 O autor defende （muito bem） que esses têm papel fundamental para o alcance das metas。Outra boa notícia é que， em 2014， o autor foi publicado no Brasil: "Desbravando a Gestão de Portfólios - uma abordagem não convencional para o investimento institucional"， Bei Editora。 。。。more
John
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I found The Four Pillars of Investing by Bernstein a better read。 This book repeats itself so often that 100 pages could be trimmed easily from it。
Chris
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A must read for all investors。
Peter Keilman
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This is valuable for understanding how strong portfolio managers think about various types of alternative investing。 Recommended for its contrarian view， especially around fixed-income investing。
Bart Kramer
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Great book on portfolio management
Peter
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Pretty repetitive but generally interesting and good fundemental approach to investment and different asset classes。
Joseph Stec
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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。 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。 。。。more
Tyson Strauser
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