How Yale Beat the Market
The Yale Endowment released their 2017 report, taking a victory lap over their 20-year returns. In their hubris, the endowment’s management team let slip the secret to beating the markets. “[A]ctive management can be a powerful tool for institutions that commit the resources to achieve superior, risk-adjusted investment results.” If only Harvard had thought to commit the resources to achieve superior, risk-adjusted investment results! What’s happening here is two of the planet’s greatest active managers disagree about passive investing. Warren Buffett says most individual and institutional investors would be better off indexing. Yale’s David Swenson argues that institutional investors with the resources to do so should just pick good funds. Check out this gem of a footnote in the report: “Yale’s 106.3% venture capital return over the past twenty years is heavily influenced by large distributions during the Internet boom. Since such a calculation assumes reinvestment of proceeds from the…
