What Did Yale University's Endowment Manager Recommend?

David Swensen managed Yale's endowment for more than 30 years.

As manager of Yale University's endowment from 1985 until his death in 2021, David Swensen delivered the best track record among his peers. A key to his success: Swensen was well known for emphasizing private market investments, including private equity, venture capital and hedge fund strategies.

But in the preface to his book Unconventional Success, Swensen starts by saying that he "contemplated writing a different book." His original intention was to help individual investors employ some of the techniques he had been using at Yale.

What he found, though, was that the mutual funds available to individual investors had terrible track records: "...the data clearly pointed to the failure of active management by profit-seeking mutual-fund managers to produce satisfactory results for individual investors."

As a result, Swensen's book ends up recommending "equity-oriented, broadly diversified portfolios without the active management component." In other words, Swensen's recommendation to individual investors is the same as Ben Graham's. Despite his own success with active management, Swensen's advice is to stick with index funds.