David F. Swensen Quotes

“By relying on the decisions of others to drive portfolio choices, investors fail to take responsibility for the most fundamental fiduciary responsibility—designing a portfolio to meet institution-specific goals.”

“Don't let what other people say disturb your mind. Be happy.”

“I believe that the greatest teachers create thinking students.”

“I see every day how competitive the markets are, and how tough. So the idea that you can do this yourself, that's out the window.”

“I've always viewed high-frequency trading as a tax on the rest of us.”

“I’m looking for somebody that’s got a screw loose and they define winning not by being as rich as they can be individually, but by producing great investment returns.”

“Just as the secret of real estate is location, location, location, the real secret to Yale’s remarkable continuing success is defense, defense, defense.”

“Millions of mutual-fund investors sleep well at night, serene in the belief that superior outcomes result from pooling funds with like-minded investors and engaging high-quality investment managers to provide professional insight. The conventional wisdom ends up hopelessly unwise, as evidence shows an overwhelming rate of failure by mutual funds to deliver on promises.”

“Most active mutual funds are more interested in collecting fees than in boosting returns for investors.”

“Never underestimate the gullibility of large pools of money.”

“That which works is authentic. It's a practical truth. What really matters is that we find benefit, regardless of whether it's an ancient traditional approach or some new version, popular or obscure.”

“Unless an investor has access to incredibly high-qualified professionals, they should be 100 percent passive - that includes almost all individual investors and most institutional investors.”

“Active management strategies demand uninstitutional behavior from institutions, creating a paradox that few can unravel. Establishing and maintaining an unconventional investment profile requires acceptance of uncomfortably idiosyncratic portfolios, which frequently appear downright imprudent in the eyes of conventional wisdom.”

“If nothing is so useless as an ivory tower academic theory that goes unused, nothing is so very practical as the theory that works.”

“John Maynard Keynes criticized fiduciaries for preferring to “fail conventionally” rather than taking, as Swensen so often does, direct responsibility for independent, even pioneering thought and action.”

“The most important distinction in the investment world does not separate individuals and institutions; the most important distinction divides those investors with the ability to make high quality active management decisions from those investors without active management expertise. Few institutions and even fewer individuals exhibit the ability and commit the resources to produce risk-adjusted excess returns.”

“From a portfolio perspective, liabilities act like negative assets. In other words, borrowing by an individual offsets lending (ownership of bond or money-market funds) by that individual.”

“If an individual owns a small business, the equity-oriented nature of the private holding argues for a lower equity position in the investor’s financial holdings. Investors benefit from taking the broadest view of their financial circumstances.”

“In fact, wealth-maximizing individuals compare the after-tax costs of debt with the after-tax returns from bonds, liquidating bond positions to pay off loans when the costs of debt exceed the returns from bonds. Rational investors consider liability positions when making asset allocations.”

“Six asset classes provide exposure to well-defined investment attributes. Investors expect equity-like returns from domestic equities, foreign developed market equities, and emerging market equities. Conventional domestic fixed-income and inflation-indexed securities provide diversification, albeit at the cost of expected returns that fall below those anticipated from equity investments. Exposure to real estate contributes diversification to the portfolio with lower opportunity costs than fixed-income investments.”

“Supremely rational investors take the further step of acting against consensus, rebalancing to long-term portfolio targets by buying the out-of-favor and selling the in-vogue.”

“The mutual-fund industry sits at the center of a massive market failure. The asymmetry between sophisticated institutional providers of investment management services and unsophisticated individual consumers results in a monumental transfer of wealth from individual to institution.”

“Thoughtful investors build investment programs on a fundamental understanding of the reasons for pursuing a nonconventional approach.”

“When you look at the results on an after-fee, after-tax basis, over reasonably long periods of time, there's almost no chance that you end up beating the index fund.”