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Yale’s Investor Keeps Playbook

An excerpt from an interview with Yale endowment CIO, David Swensen is outlined below. The entire article can be reviewed by following this link;

He isn’t a household name. But as the Yale University’s endowment’s chief investment officer for two decades, has earned a reputation as one of the world’s savviest and most successful investors. Yet even Yale hasn’t escaped the financial crisis.

The university estimated late last month that the endowment had lost 25% of its value since the end of June. That is expected to lead to budget cuts and puts Mr. Swensen in line for his first negative fiscal year since 1988. Other endowments that have set out to follow the strategy he has advocated are also suffering.

He spoke to The Wall Street Journal about the financial crisis, hedge funds, scandal-scarred money manager, and ill-fated efforts to mimic Yale’s investment strategy. Here are questions and his answers, edited for context and clarity.

WSJ: Does the poor performance of most assets last year suggest you need to tinker with the endowment’s portfolio to better withstand another year like 2008?

Mr. Swensen: I don’t think it makes sense for an institutional investor with as long an investment horizon as Yale’s to structure a portfolio to perform well in a period of financial crisis. That would require moving away from equity-oriented investments that have served institutions with long time horizons well.

Craig Karmin WallStreet Journal Tuesday January 13, 12:52 pm ET