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Yale’s David Swensen leaves a powerful investment legacy behind: NPR


David Swensen speaks in 2012 at an event honoring Jack Bogle, who created the first index fund. Like Bogle, Swensen was a champion of the everyday investor who he believed should invest in low-cost index funds and avoid actively managed mutual funds with higher fees.

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Yale’s David Swensen leaves a powerful investment legacy behind: NPR

David Swensen speaks in 2012 at an event honoring Jack Bogle, who created the first index fund. Like Bogle, Swensen was a champion of the everyday investor who he believed should invest in low-cost index funds and avoid actively managed mutual funds with higher fees.

Bloomberg / Bloomberg via Getty Images

A pioneering investor who led the Yale University endowment, David Swensen, died this week at the age of 67 after a years-long battle with cancer. Swensen revolutionized the way many colleges invest, injecting some schools and nonprofits with a lot more resources to pay for things like student aid and research.

Swensen was widely regarded by other investors as one of the biggest in the world. Case in point: He increased Yale’s endowment from $ 1 billion in 1985 to $ 31 billion last year.

But it’s not a household name. And maybe that’s because he didn’t make those billions for himself – although, with his track record, he almost certainly could have if he had started his own hedge fund.

Instead, after a career start on Wall Street, Swensen returned to Yale, where he had obtained his doctorate in economics. He took charge of the university’s investments and stayed there for the rest of his life.

“And look, I had a great time on Wall Street,” Swensen told NPR in 2006. “But it didn’t satisfy my soul.”

Instead, Swensen wanted to make money with more sense of mission around him. “I have always liked educational institutions,” he said. “My father was a college professor. My grandfather was a college professor.”

On the side, Swensen has taught a popular class about investing at Yale for decades. (He was teaching just two days before his death.) He ran into people less like an investment titan than a very likeable math teacher in high school or college.

But very quickly, this unpretentious man revolutionized the way universities invest their money.

Instead of buying a simple mix of stocks and bonds, Swensen researched the best boutique investment firms and, through them, invested in all kinds of things: real estate, lumber, shampoo, and soap companies. in Asia. He has invested seed money in technology start-ups.

His great insight was that – if done right – an endowment would make more money with less risk by hiring very talented fund managers to invest in many different types of assets.

Basically he built a table with 10 feet: very stable even if a few feet wobble or fall.

“He was extremely important to me personally,” says Tom Steyer, the billionaire investor who recently ran for president. Steyer says that early in his career Swensen invested through his hedge fund – which was a big deal. While Swensen gained respect in the investor world, it was a seal of approval if he chose a particular hedge fund to manage some of Yale’s various investments.

“What David did was he developed new ways of thinking about investing,” Steyer says. “He did it with absolute integrity and honor. And he did it for a cause greater than himself; he did it to try and continue his graduate studies in the United States of America. ”

Yale’s David Swensen leaves a powerful investment legacy behind: NPR

David Swensen served on President Barack Obama’s Advisory Council on Economic Recovery from the Financial Crisis. He was seen here in 2010 with Chairman and Former SEC Chairman William Donaldson (second from right) in the White House.

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Swensen also became known for finding new talent; sometimes that meant people who didn’t even have a background in finance.

“I was an art conservator working for museums,” says Paula Volent, who was studying at the Yale School of Management when she asked Swensen for a job on campus – just fill out the papers at the office. investment.

Volent wanted to know a little more about endowments because she wanted to one day run a museum.

“I went to knock on his door and he greeted me,” says Volent. She says Swensen was a good teacher and quickly began to give her more and more responsibility.

Today, she is the Director of Investments at Bowdoin College.

“He was so passionate about investing, it was contagious, you know, and it was so interesting working there,” says Volent. And she says Swensen encouraged her and other women to work in the male-dominated world of investing and finance.

“David was the person he never doubted you could do it,” she said. “And a lot of times he would push you to do things and be great.”

A few years ago, Volent’s endowment in Bowdoin beat Yale’s 10-year comeback, which Swensen definitely noticed.

“He wrote me this letter, it’s a bit personal,” Volent said, removing the framed letter from his wall.

He said, ‘Congratulations Paula – the poor one is the pupil who does not surpass the teacher’, which is a quote from Leonardo da Vinci. “

Volent is not the only student to have done well. The proteges of Swensen continued to manage endowments in many other schools and nonprofits. Rob says they’re sometimes called the Yale Mafia. (But, like, the nice mafia.)

Swensen also wrote a book, Unconventional success, telling ordinary people how to invest and avoiding pitfalls such as excessive fees charged by mutual funds.

Swensen spoke in the book about how common people often can’t fit into the types of investments he made with Yale endowments; the fee structures offered to them are simply too high and do not match the interests of investors.

“He would be the first to say that the Yale model he launched for investing is not for everyone,” Volent says. “He was the pioneer in alternative investments, venture capital, hedge funds, etc., in institutional portfolios.

But Volent said, ‘it was kind of’ don’t do that at home ‘. ” She says individual investors can’t invest this way, and even colleges, pension funds and nonprofits need to have seasoned staff and expertise to be successful.

Part of that has to do with knowing how to choose really good people to invest with. Another concerns fees.

When it comes to individual investors, for example, Swensen has harshly criticized how the vast majority of large, actively managed mutual funds offer lower returns than simple low-cost index funds, after factoring in fees. And mutual funds make huge sums of money whether the fund is performing well or not.

Conversely, for institutional investors with the power and expertise, Volent says that Swensen firmly believed there was a place for active management by investing with “small businesses, boutique type businesses where when the manager makes money, you make money. , the manager loses money. “

As a person, Volent says Swensen was also fun to be and to work with. He got everyone to play on the office softball team. And when they were up all night doing a big mailing, he often showed up with a keg of beer.

“He loved being around people,” she says. “He will be sorely missed.”



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