Most helpful positive review
Truly unique insight into institutional portfolio management
on April 11, 2003
Swensen's book is a must-read for endowment managers and other institutional investors, particularly those who take a fund-of-funds approach (as does Yale, where Swensen is Chief Investment Officer). Swensen aptly lays out the investment policy that has enabled Yale to consistently outperform other U.S. endowments. As Yale's CIO, Swensen has set a target portfolio allocation that departs significantly from the still heavily U.S. equity and debt-focused strategy of most endowments. Swensen's approach includes a large allocation to asset classes that are not highly correlated to the U.S. public equity market. He outlines these "alternative" classes in his book, giving the reader an excellent view of how alternative investments can increase risk-adjusted portfolio returns.
Perhaps the biggest contribution of Swensen's book, however, is the debunking of myths that still lull fiducaries into making the wrong decisions, for example when it comes to picking investment managers. Swensen advises against chasing managers who have performed well simply because of their past performance. If attributes such as personal integrity and the right fee structure are lacking, solid past performance can become a liability, not an asset. Swensen describes the example of private equity firm KKR-- after tremendous early successes, the flood of investor capital into KKR enabled the firm's partners to set up a fee structure that ensured big payoffs for themselves even if their funds underperformed. This is just one of many valuable lessons the reader will draw from Swensen's book.