Quotes from David F. Swensen

I've worked many jobs throughout my life, which has ultimately enhanced my appreciation for the opportunity to teach yoga and share something so positive.

When you look at the results on an after-fee, after-tax basis, over reasonably long periods of time, there's almost no chance that you end up beating the index fund.

Supremely rational investors take the further step of acting against consensus, rebalancing to long-term portfolio targets by buying the out-of-favor and selling the in-vogue.

In fact, wealth-maximizing individuals compare the after-tax costs of debt with the after-tax returns from bonds, liquidating bond positions to pay off loans when the costs of debt exceed the returns from bonds. Rational investors consider liability positions when making asset allocations.

most important distinction in the investment world does not separate individuals and institutions; the most important distinction divides those investors with the ability to make high quality active management decisions from those investors without active management expertise. Few institutions and even fewer individuals exhibit the ability and commit the resources to produce risk-adjusted excess returns.

Establishing and maintaining an unconventional investment profile requires acceptance of uncomfortably idiosyncratic portfolios, which frequently appear downright imprudent in the eyes of conventional wisdom. Unless institutions maintain contrarian positions through difficult times, the resulting damage of buying high and selling low imposes severe financial and reputational costs on the institution.

The mutual-fund industry sits at the center of a massive market failure. The asymmetry between sophisticated institutional providers of investment management services and unsophisticated individual consumers results in a monumental transfer of wealth from individual to institution.

John Maynard Keynes criticized fiduciaries for preferring to "fail conventionally" rather than taking, as Swensen so often does, direct responsibility for independent, even pioneering thought and action.

carefully constructed, rigorously tested portfolio structure and decision-making process that are clearly defensive.

If nothing is so useless as an "ivory tower" academic theory that goes unused, nothing is so very practical as the theory that works. At

Anticipated receipt of a fixed amount from life insurance proceeds represents a virtual fixed-income asset, suggesting a diminished role for bonds in an investor's portfolio.

you will marvel at how very unusual Yale's team of star performers is in combining rigor and objectivity with the personal warmth and trust that avoids "politics" or "positioning" and maximizes real listening for full understanding every day.

Personal residences and privately held businesses constitute important nonfinancial assets on many personal balance sheets. Homeownership insulates individuals from changes in the cost of renting a place to live. Since inflation-sensitive habitation costs constitute a significant portion of most household budgets, homeownership reduces the need for inflation-hedging assets in investor portfolios.

If an individual owns a small business, the equity-oriented nature of the private holding argues for a lower equity position in the investor's financial holdings. Investors benefit from taking the broadest view of their financial circumstances.

Given the difficulties in timing markets and the challenges of security selection, such behavior provides a rational foundation for investment management. By avoiding extreme allocation shifts and holding diversified portfolios, investors cause asset allocation to account for the largest share of portfolio returns.

From a portfolio perspective, liabilities act like negative assets. In other words, borrowing by an individual offsets lending (ownership of bond or money-market funds) by that individual.

Finally, David Swensen has made it fun to work on investing for Yale—recruiting a team of exceptionally talented Yale graduates

Fourth, Swensen & Co. are extraordinarily thoughtful about and engaged with their client, Yale University.

Street Advisors, a highly regarded research firm that concentrates on publicly traded real estate securities, routinely examines discrepancies between market price and fair value. The

Third, those bonds of professional respect and personal friendship extend out to the hundreds of key people working at Yale's many investment managers and engage them in unusually beneficial ways

The shift in accountability from employer to employee caused a move from reasonably well-managed, low-cost investment programs to generally poorly managed, high-cost investment programs.

Thoughtful investors build investment programs on a fundamental understanding of the reasons for pursuing a nonconventional approach.

The fifth secret may well be the most important: personal respect and affection. Visitors to Yale's Investments Office are invariably impressed by the open architecture and informal "happy ship" climate that is almost as obvious as the disciplined intensity with which the staff work at their tasks and responsibilities. Positive professionals perform at their peak productivity and teams get better with low turnover.

In its most basic form, the message of Unconventional Success requires only a few pages to describe the blueprint of a well-diversified, equity-oriented, passively managed portfolio, using not-for-profit investment managers to implement the plan.