Invest like the Greats!

David Swensen (Yale endowment fund) was arguably one of the great world’s money manager (David passed way recently unfortunately). For people who don’t know the name, please check his wiki here (https://en.wikipedia.org/wiki/David_F._Swensen). Under David’s leadership, the Yale endowment fund produced returns in excess of 20% from 1988 to 2008 turning $1 billion into almost $23 billion before the financial crisis hit in 2008. That is exceptional performance not only because of what he was able to achieve from a return standpoint, but more importantly due to the consistency. Often as investors we tend to overlook the risk of any particular investment in search for “better” alternatives. Often a higher return means “better”. That is a wrong way to look at it though. What is crucially important is risk adjusted performance or returns adjusted for risk. This is where Swensen shined. Not only did he not produce a superior return but he did so very consistently.

One wonders how was he able to do it? David was a big fan of alternative assets, of which real estate was a big component of his investment thesis. Swensen target portfolios allocated 10%+ to Real assets (including REITS). Some of the advantages of real estate investing include diversification, low correlation with conventional asset classes and a natural inflation hedge. In the more recent times, the Yale endowment fund has a shockingly low allocation to US stocks. Please check the article below:  (https://www.barrons.com/articles/yale-endowment-only-2-percent-u-s-stocks-51630535033)

Average retail investor participation in real estate is much lower than what Yale/Swensen recommend (~2% according to some recent surveys we conducted). How much of your portfolio is allocated to Real estate?