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Pioneering Portfolio Management: An Unconventional Approach to Institutional Investment
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- Sales Rank: #7723494 in Books
- Published on: 2000-05-30
- Binding: Hardcover
Most helpful customer reviews
6 of 6 people found the following review helpful.
Insightful and structured review of institutional money management
By D. J Najarian
David Swensen has written a commendable book. Perhaps most commendable is his focus on ethical money management with a focus on fiduciary responsibility to the investor--a Birkshirean theme worth reiterating over and over.
The principal value of this book derives from its discussion on the use of alternative investments--such as private equity, market neutral strategies, and venture capital. Indeed, in the first paragraph of the books cover it is noted that "Largely focusing on nonconventional strategies, including a heavy allocation to private equity, Swensen has achieved an annualized return of 17.4%." Ironically, however, within the book Swensen writes in detail how and why private equity investing provides inferior risk adjusted returns vs. investment in plain vanilla marketable securities (e.g. S and P 500 index). This information is especially interesting given the recent investment by the Chinese government (purported disciples of David Swensen) in the Blackstone group IPO!!!!
Swenson's discussion about inferior risk adjusted returns provided by venture capital funds, his discussion about market neutral strategy returns, and his discussion about the importance of long term treasuries vs. other bond alternatives are equally interesting.
Overall, this book is good and differentiated, but somewhat inferior to other classics (e.g. One up on wall street by Peter Lynch, A Random Walk Down Wall Street by Malkiel, etc.). I would suggest waiting for the new edition of Pioneering Portfolio Management to come out instead of buying this older edition (2000)
36 of 36 people found the following review helpful.
Truly unique insight into institutional portfolio management
By John Mihaljevic
Swensen's book is a must-read for endowment managers and other institutional investors, particularly those who take a fund-of-funds approach (as does Yale, where Swensen is Chief Investment Officer). Swensen aptly lays out the investment policy that has enabled Yale to consistently outperform other U.S. endowments. As Yale's CIO, Swensen has set a target portfolio allocation that departs significantly from the still heavily U.S. equity and debt-focused strategy of most endowments. Swensen's approach includes a large allocation to asset classes that are not highly correlated to the U.S. public equity market. He outlines these "alternative" classes in his book, giving the reader an excellent view of how alternative investments can increase risk-adjusted portfolio returns.
Perhaps the biggest contribution of Swensen's book, however, is the debunking of myths that still lull fiducaries into making the wrong decisions, for example when it comes to picking investment managers. Swensen advises against chasing managers who have performed well simply because of their past performance. If attributes such as personal integrity and the right fee structure are lacking, solid past performance can become a liability, not an asset. Swensen describes the example of private equity firm KKR-- after tremendous early successes, the flood of investor capital into KKR enabled the firm's partners to set up a fee structure that ensured big payoffs for themselves even if their funds underperformed. This is just one of many valuable lessons the reader will draw from Swensen's book.
1 of 2 people found the following review helpful.
Good insights; Perhaps DS cannot see his own hubris though
By Franz K.
This is an excellent book about the workings of an institutional portfolio and the various influences pulling at investment decisions.
Lots of good anecdotal stories of mis-steps by *other* institutions. I would love to hear about some mistakes that DS has made during his tenure.
He deals implicitly w/ agency issues that exist in most money management situations. For a more detailed explication of agency conflicts, read, "Unconventional Success".
He attributes a lot of manager success to luck. However, how much of DS's and Yale's success is due to luck? He does not subject his own performance (that of managing the managers) to any sort of benchmark.
Finally, he gives very short shrift to the back-office and operational issues (1 page at the end of the book). This is the achilles heel of 80% of management firms. They cannot scale, control, and maintain quality as they grow. This is the same, "Its all in the front office" mentality that presages so many other stumbles into mediocrity (not blow ups - just a benign drift downwards in rankings). I hope this same fate does not befall DS and Yale.
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