The Money Management Gospel of Yale’s Endowment Guru

On 6th November, New York Times ran an article, The Money Management Gospel of Yale’s Endowment Guru, written by Geraldine Fabrikant. This is one of the articles we highly recommend you to read. Everybody knows the importance of the long-term approach, but this article tells us that they key for the long-term investment is how to deal with managers, whose approach sound but is going through a tough patch.

Geraldine Fabrikant

Here are a few excellent quotes from the article:

Mr. Swensen likes teaming up to invest with his former analysts. For one thing, it can reduce the risk of panicky withdrawals. “We were talking to a manager who just had capital taken away because the fund had a bad year,” Mr. Swensen recalled. “The investor said, ‘Your five-year numbers are not so good, so we are firing you.’ That sounds like the stupidest thing I ever heard,” Mr. Swensen said.

A portrait of David Swensen at Yale

Anne Martin, a former Swensen intern who manages Wesleyan’s endowment, described vetting one private equity fund. “We were near the end of the process. I worried that some of the terms were not fair, so I called the manager,” she said, who adopted a dismissive tone. “I am not adjusting the terms this time, and I am not going to talk to you about it,” she recalled him saying. “So I thought: This is a partnership, and there will be tough times, so how will it be then?” she said. Wesleyan didn’t give him the money.

As you might know, we “religiously” follow Dr. Swensen’s approach and have written several articles. We believe that the most important attribute for Yale’s success is not their superior access to managers or prophetic asset allocation, but their long-term investment philosophy.