Successful in 2008, Swensen Protégé Criticizes 'Yale Model'

The Yale model is probably “true over time. But in calendar ‘08, it’s exactly wrong. The less liquid you are, the more you’re getting hurt.

- Swensen protege David Salem

Cooper Union’s endowment is going to be flat or slightly up in its fiscal year ending today. In an article in today’s Wall Street Journal (“One College Sidesteps the Crisis” (subscription required)) that reviews how they did it, John Michaelson, who heads Cooper’s investment committee, criticizes the “Yale Model” of David Swensen which has been so highly praised in recent years, calling it “deeply flawed”.

Swensen, who advocated alternative investments like hedge funds, private equity and real estate, is a rock star. But his approach has not been successful of late with Swensen recently saying Yale’s endowment will be down 25% in the fiscal year ending today (for example, see this profile of Swensen: “Cash Me If You Can”, Portfolio Magazine, April 2009; also see “Ivy League Endowments Finally ‘Dumb’”, The Wall Street Journal, June 30).

Comments

[Dave Shafer:]

You probably shouldn't adjudicate investing strategies based on one year's results. The full article also explained that the results for some were concerning because they use endowment returns for operating expenses.

Jul 01 09:20 AM

[Bob Shreve:]

Markets go up and markets go down. The reality of Swensen's skill and the "Yale model's" success will be measured over time, not for 2008 alone. Perhaps the institutions that are having problems should have stuck $ for their immediate needs in shorter term instruments, the way we mortals are advised to do.

Jul 02 08:40 PM