In the days following Yale CIO David F. Swensen's death, articles about his work, his dedication to Yale University, its students, its endowment and to investing overall have made it clear how sorely he will be missed and the profound effect he had on asset management. By no means did he make investing simple, but throughout his 36 years successfully running the Yale endowment and teaching others to invest, he espoused clear guidance about how institutions and individuals should manage money.
In his two books — the first, "Pioneering Portfolio Management: An Unconventional Approach to Institutional Investment," and the second, "Unconventional Success: A Fundamental Approach to Personal Investment," written for individual investors — he offered advice that in the era of cryptocurrency, Archegos, Robinhood and GameStop could not be more important.
For institutions, as author of the "Yale model" he changed the way endowments invest — moving to an approach that capitalizes on long-term investors' opportunity to take on additional risk in the form of illiquidity. He made definitive moves into private equity and venture capital, international investments and hedge funds. But he did so with significant emphasis on governance, risk management and risk control that took the form of careful selection of both advisers and managers, as well as diversification within and among asset classes.
He apparently was a man who very much sweated the details.
For individuals, he advocated (in this case in an 2009 Q&A with the Yale Alumni Magazine) portfolios weighted toward equities — as much as 70% — but specifically those accessed through index funds "because they're transparent, understandable, and low-cost" and focused as well on the importance of rebalancing to an asset allocation that ultimately is the "tool that you use to determine the risk and return characteristics of your portfolio."
He recognized that his style of investing could be seen as "boring" and would not make for good cocktail party conversation.
In today's world, as new ideas and gimmicks swirl, it is important for all investors — retail as well as institutional investors guiding endowments, pension funds, defined contribution plans and more — to keep his principles and his ideas top of mind.
Mr. Swensen in the Yale Alumni interview was clear that he thought not all investing styles were for all investors.
"The most important difference, in terms of categories of investors, is between those who can make high-quality active management decisions and those who can't. 'Pioneering Portfolio Management' is for those who have the ability to manage portfolios actively. 'Unconventional Success' is a book for the overwhelming number of individual and institutional investors who cannot manage a portfolio actively," he said. "Almost everybody belongs on the passive end of the continuum. A very few belong on the active end."