David Swensen - Yale University Chief Investment Officer and manager of the University's endowment
"You should invest only in things that you understand. That should be the starting point and the finishing point. For most investors the practical application of this axiom is to invest in index funds (low-fee investments that aim to mirror the performance of a particular stock market index). The overwhelming number of investors, individual and institutional, should be completely in low-cost index funds because that’s easy to understand.” David Swensen Financial Times October 8th 2009
In this video, David Swensen discusses the tactics and tools that Yale and other endowments use to create long-term, positive investment returns. He emphasizes the importance of asset allocation and diversification and the limited effects of market timing and security selection. Also, the extraordinary returns of hedge funds, one of the more recent phenomena of portfolio management, should be looked at closely, with an eye for survivorship and back-fill biases.