Chambers, D. & Dimson, E. (2014) “The British origins of the US endowment model“, VoxEU Organisation, 20 Οκτωβρίου.
Yale University has generated annual returns of 13.9% over the last 20 years on its endowment – well in excess of the 9.2% average return on US university endowments. Keynes’ writings were a considerable influence on the investment philosophy of David Swensen, Yale’s CIO. This column traces how Keynes’ experiences managing his Cambridge college endowment influenced his ideas, and sheds light on how some of the lessons he learnt are still relevant to endowments and foundations today.
In recent years much attention has been given to the so-called ‘Yale model’, an approach to investing practised by the Yale University Investments Office in managing its $24 billion endowment. The core of this model is an emphasis on diversification and on active management of equity-orientated, illiquid assets (Yale 2014). Yale has generated returns of 13.9% per annum over the last 20 years – well in excess of the 9.2% average return on US college and university endowments. Other leading US university endowments have followed this model (Lerner et al. 2008). Many other types of investors have thought to adopt this model, either in part or in whole.
David Swensen, Yale’s CIO, quotes John Maynard Keynes extensively in his excellent book Pioneering Portfolio Management. It is clear that Keynes’ writings were a considerable influence on Swensen’s investment philosophy. The key ideas that he takes from Keynes are:
- The futility of market timing (Swensen 2009: 64);
- The benefits of a value approach (Swensen 2009: 89);
- The attractions of being a contrarian (Swensen 2009: 92);
- Bottom-up security selection (Swensen 2009: 188); and
- The great difficulties inherent in group decision-making, which push an investment organisation towards a situation where “it is better for reputation to fail conventionally than to succeed unconventionally” (Swensen 2009: 298).
A natural question which arises at this point is from where did Keynes gain these insights? Our study of Keynes’ experiences managing his Cambridge college endowment sheds light on how some of the lessons he learnt are still relevant to endowments and foundations today (Chambers et al. 2014).
Σχετικές αναρτήσεις:
- Bonczek, T., Fuest, C. & Schröder, M. (2014) “Who is afraid of the Asset Quality Review? Potential Losses and Capital Shortfalls in the European Banking System“, Centre for European Economic Research, Discussion Paper No. 14-074 , Οκτώβριος.
- Altomonte, C. & Bussoli, P. (2014) “Asset-backed securities: The key to unlocking Europe’s credit markets?“, Bruegel Institute, 24 Ιουλίου.
- Tsianos, V. (2014) “It’s the Youth, Stupid! Greece’s most undervalued asset“, Eurocrisis in the Press, LSE EUROPP, 07 Ιουλίου.