Richard Borin

An Endowment Portfolio From Publicly-Traded Vehicles

Even though asset allocation, correlation, and the use of alternative asset classes has been at the core of Swenson's superior returns over the years, he is an active manager and has always made it clear that it is difficult for the individual investor to duplicate his institutional portfolios. Nevertheless, I certainly think it is worth the effort and I believe fascinating work and backtesting could be done in this area. Modern Portfolio Theory is based on the futility of market timing and superior stock selection. Of the top 100 performing managers annually, only 10% repeat. Moral of the story-don't chase performance. Nevertheless, Swenson openly acknowledges that he is able to find superior managers and that is a key ingredient to his success. This would probably involve entrepenureal private partners in the area of Real Estate, infrastructure and other real assets. He is certainly aware of when asset classes become crowded (such as REITS with premium to NAV) and manages to stay clear. I would also guess that he would be very selective with exposure to Hedge Funds as part of his absolute return asset class. He always seems to manage to stay one step ahead of those attempting to emulate him. So his m.o seems to be asset allocations for risk management but very active management within those asset classes including active equity allocations. Therefore, it cannot be easy to attempt to copy Yale using ETFs and Index Funds. However, I think it is a fascinating study that opens up many possibilities. One other comment regarding Brookfield Asset Management (BAM). Their CEO delivered an interesting talk at a recent conference. Though most of their current deals are Real Estate related, he believes infrastructure deals globally represent a huge opportunity and is forging partnerships in this field. They will soon spin off an the infrastructure division into a separate company. It is a way for the individual to indirectly participate in building of infrastructure although only as a stockholder.