Capture Unconventional Success: A Fundamental Approach To Personal Investment Rendered By David F. Swensen Shown As Script

first half of the book was great for asset allocation tips, clearly delineating various asset classes as to risk exposure and historical return characteristics.
The second half quickly descended into a rant against the mutual fund industry, While some points here had validity, Swensen continuously engaged in quite a bit of vitriol and sarcastic commentary following his more academic reporting of his and other's MF analysesquite unprofessional.


There are a few items of reasoning that did not seem to make sense, For example, one of his premises is that fund size Assets Under Management is the enemy of performance, One might reasonably assume that this would apply only to actively managed funds and not to index funds for obvious reasons, However, my experience has been that generally the greater assets under management accumulated by a mutual fund, the greater the difficulty in deploying those funds effectively, and thus the outlet is to buy large cap companies, which in turn realistically would engender a more indexlike return minus fees and expenses, of course.
Let's then look at the contrary, or a smaller fund size, His argument in the book is that security selection is almost always a detriment to portfolio performance, as Swensen claims that managers cannot consistently select companies that will outperform the market at large.
Thus, it would seem that the smaller the fund size, the more concentrated bets the manager would be able to make, and thus the likelihood of below average returns would increase.
this does not even take into account the lack of economies of scale for administrative and trading expenses forgone by small fund size, So, there is a bit of an apparent contradiction of premises among a few of the arguments presented, One of the most interesting facets is a chapter entitled "Winning the Active Management Game", which does nothing but provide a caseinpoint example of a fund management company doing it "the right way".
Coincidentally, the funds performances are quite good, beating the associated benchmarks by hundreds of basis points overandyear timeframes, I'm wondering a how much did Swensen get paid to sell this fund manager in his book, and b why select a fund company that both does it the right way and vastly outperform, if your agenda is to bash mutual funds and active management Not only does Swensen bash active security selection, he also bashes active asset allocation, preferring that investors take historical returns and risk profiles of various asset classes as a strong indication of future dynamics.
A prime example of how this will absolutely NOT be true are Fixed Income, As one may know, bond prices move inversely to prevailing interest rates further, interest rates have just completed the greatest plummet in market history, withyear treasury yields falling from.
in thes to a measily,today, with a long term average of,and a median of It would be patently foolish to believe that total returns on bonds will be anywhere near what they have been during thisyear timeframe,

The dichotomy continues for anyone familiar with Swensen's annual yale endowment reports, where he constantly credits "superior active management" to the fund's excess returns over market benchmarks.
For one that does not believe in active management, he and his cohort at the Yale Endowment appear to be doing a fine job of "actively managing" their funds.


The takeaway invariably is that asset allocation and asset class risk exposure matter, and that Swensen would recommend lowcost index funds or wellconstructed ETF vehicles for market exposure.
Ultimately, I don't believe one will go wrong following this adviceespecially on the asset allocation and selection basisbut I do believe that using superior managers, whether through mutual fund vehicles or not, may provide better risk adjusted returns than their index counterparts.


I recommend the individual investor read the first half of the book, glean some asset allocation advice from a superior endowment manager, and leave the secondhalf for the birds.
A great guide for portfolio management using index based or ETFs low cost tools instead of Mutual funds Also advises against the glamour of Hedge funds VC's and such non core Asset classes.
Explains the down sides to timing and chasing returns and clarifies the value of contrarian rebalancing, Warns against the new fad of managed ETFs Swensen argues that there are basically three sources of returns: asset allocation which markets do you choose Bonds, stocks, real estate, market timing when to sell and when to buy and security selection after you chose your markets, which stocks, bonds, etc.
do you pick. The book is structured by this argument,

I skipped large portions of the book as I realized that I want to look at different markets as Swensen, I am more interested in the token economy than the "core asset classes" he suggests, also his critique on mutual funds was not interesting to me because I do not plan to invest there.


However, I liked the way Swensen substantiates his claims, His book has some careful selected and compiled tables that actually show that his points are not some sort of gut feeling, That is something I did not see that often in Personal Finance literature,

What I remember from this book is: Market Timing is hard, Portfolio Rebalancing for example, pick ten stocks with the highest estimated Sharpe ratio on regular intervals may work, performance chasing most likely not, At least my investment strategy should benchmark against a strategy that does very little market timing,


Good advice: diversify, especially with respect to asset class, and skip certain assets altogether e, g. , corporate bonds. But slightly stodgy perhaps to be expected and excessive pages spent hating on salesmen/poor performers, Information packed, but a rather unnecessary book for the conventional investor, Id recommend reading John C, Bogles The Little Book of Common Sense Investing instead, CFA In Memoriam: David Swensen
sitelink cfainstitute. org/invest
Pretty long, drawnout, and dated, Much respect to the author who is one of the best modernday investors but I feel this book was better articulated in say John Bogles Common Sense on Mutual Funds.
I suppose if one is really detail oriented and theoretical, this would be a great book but in that case, he has a more quantitative book 'Pioneering Portfolio Management' which seems to receive rave reviews.
This book was designed for the mass market but even as a financial hobbyist this is waning given my realization that to manage sums of less thanfigures, you can and should use lazy portfolios and this book seems to advocate that as well.
The portfolio posited in this book backtests really well and is theoretically sound backed by the few hundred pages in this book,

US equity:
Foreign developed equity:
Emerging market equity:
US REITS:
US Treasury bonds:
US TIPS:

He did host a guest lecture at Yale which is definitely worth listening to.
. . Too much bashing of mutual funds to my taste, but otherwise a good read,

The author proposes following globally diversified portfolio:
US stock market
REITs
Int, Developed stock market
Emerging stock markets
Bonds
TIPS

In the book, he thoroughly describes the reasons behind owning each of these asset classes.

Such a portfolio has some properties of an allweather portfolio which will shine not only in prosperity environment with normal/lower inflation but also protects you from high inflation due to holding TIPS and REITs.

The author may be a good fund manager and an experienced investor, The book was written poorly, He loved to use the academic language, such as very long sentences, indirect descriptions and iteration of the same meaning for many times, The book is not attractive for reading, It's hard for me to follow the author's ideas and I lost my patience in some chapters when the author dedicated a few pages to repeat one same idea back and forth.


It's not a total waste to read the book though because the author really had the insights about asset management and fund investment pitfalls to avoid.
But the book is really dry to read and difficult to comprehend, The bestselling author of Pioneering Portfolio Management, the definitive template for institutional fund management, returns with a book that shows individual investors how to manage their financial assets.


In Unconventional Success, investment legend David F, Swensen offers incontrovertible evidence that the forprofit mutual fund industry consistently fails the average investor, From excessive management fees to the frequent "churning" of portfolios, the relentless pursuit of profits by mutual fund management companies harms individual clients, Perhaps most destructive of all are the hidden schemes that limit investor choice and reduce returns, including "paytoplay" productplacement fees, staleprice trading scams, softdollar kickbacks, andbdistribution charges.


Even if investors manage to emerge unscathed from an encounter with the profitseeking mutual fund industry, individuals face the likelihood of selfinflicted pain.
The common practice of selling losers and buying winners and doing both too often damages portfolio returns and increases tax liabilities, delivering a onetwo punch to investor aspirations.


In short: Nearly insurmountable hurdles confront ordinary investors,

Swensen's solution A contrarian investment alternative that promotes welldiversified, equityoriented, "marketmimicking" portfolios that reward investors who exhibit the courage to stay the course.
Swensen suggests implementing his nonconformist proposal with investorfriendly, notforprofit investment companies such as Vanguard and TIAACREF, By avoiding actively managed funds and employing clientoriented mutual fund managers, investors create the preconditions for investment success,

Bottom line Unconventional Success provides the guidance and financial knowhow for improving the personal investor's financial future, This is only slightly dated and the rage that Swensen feels towards the actually existing finance industry comes across pretty clear, The thrust of the book is that rational investing for most people requires a small set of tightlyheld principles and a good ability to ignore the large number of voices that will try to tempt you away from what you know is right.
I am always terrified at how many 'common sense' opinions about finance are flatly wrong and that the industry is quick to cash in on those misconceptions.
I don't know much about investing but I heard about Swensen on an NPR show soon after his death, This book sounded interesting and helpful, and it was, However, it's very textbooklike, but without a glossary, Thankfully, each chapter and sometimes the sections in the chapters has a summary, so I ended up reading those and skimming the rest, That was enough for me! Sitting on a board for a private foundation, I have heard the name David Swensen mentioned over and over from our investment advisors.
Swensen is the Chief Investment Officer for Yale University and has attracted the attention of the investment world for his stellar results in that position.
Hisbook, Pioneering Portfolio Management, is a classic guide for foundation portfolio management, When I learned that a revised version of Pioneering Portfolio Management was being written and scheduled to be released in early in, I decided to read his book for personal investment that was published just three years ago.
I started this book

in midSeptember, when things look shaky on the Dow but hadnât yet gotten downright depressing, As I read, the market started to react erratic and I, along with everyone else, saw investments drop like lead sinkers, Iâve wondered what Swensen would say about the current turmoil in the market, but I feel he would stand by much of what heâs written.


Unconventional Success is not an âœinvestment howto book, â There are no âœstock tipsâ here, only warnings, Thereâs no discussion on building a portfolio or any of those silly charts as to what might happen if we place a hypotheticala month into investments foryears.
Instead, Swensen takes a more academic approach, The first two parts of the book roughly the first half deals with investment theory, Swensen covers asset allocation and market timing, This section was well written and explores the various options for investing and provides a good introduction into the various forms of securities available, Swensen, like most investment gurus, is in favor of well diversified portfolios, where each asset class is large enough to matter but small enough that it mitigates risk.
He illustrates a well diversified portfolio with the following targets:

Domestic equity, . .
Foreign Developed equity
Emerging Market equity .
Real Estate .
U. S. Treasury Bonds
US TIPS

Swensen prefers bonds back by the federal government and stays away from corporate bonds and foreign debt, Corporate paper limits oneâs potential gain, If interest rates fall, corporations can refinance, calling the higher interest bonds and reissuing lower interest bonds, if rates rise, youâre stuck with a lower interest rates.
Foreign debt is often risky, especially in countries where the government is shaky, Swensen splits his fixed assets between regular treasury bonds and Tips Inflation protected bonds, There are some REITS real estate investment trusts that he likes for real estate investment component, but heâs also critical of many of them due to their fee structures.
He sees REITS as longterm investments and certainly those who have invested in REITS several years ago will have to take a real long term outlook before they can recoup their investment.


Swensen also sees stocks as a long term investment, although he warns not to be too sentimental over particular companies that you want sell when you need to rebalance.
He realizes that most individuals have a hard time investing in individual companies, Traditionally, the rule has been it takes at leastdifferent stocks, diversified in various sectors of the economy, to reduce risk, Swensen suggests it may even requiredifferent stocks and agrees that the average individual doesnât have time to make such selections, The alternative, the Mutual Fund Industry, is also flawed and Swensen attacks the industry throughout this book, Heâs especially hard on mutual funds that are publically held, seeing a conflict of interest between the fundâs shareholders and the fundâs investors.
He examines the various fee structures for funds and is critical of the ways theyâve developed hidden fees to transfer value from the investor to the fund managers and owners.
He explores taxes on mutual funds and how when someone else sells their portion of the fund, it creates tax liabilities for all the fund owners.
In the whole mutual fund industry, he only identifies three funds favorably, TIAACREF Teachers Insurance and Annuity Association and College Retirement Equities Fund is a nonprofit fund set up for educators, Swensen does admit a conflict of interest with his approval of TIAACREF heâs on their board, He has mostly favorable things to say about Vanguard Funds it's nonprofit and a Longleaf Partners, a small fund that's mostly closed to new investors.
Over all, Swensen prefers index funds lower fees and lower turnover of stocks which means less taxes, He also suggests there are some benefits for ETFS Exchange Traded Funds, but admits that there is already signs of companies marketing EFTS with unfair fee structures.


Swensen warns against the practice of active management funds which try to beat the market, acknowledging that for every win, someone has to lose.
Instead of trying to beat the market, he advocates maintaining a close what on ones asset allocations and frequently rebalancing, Yaleâs foundation rebalances daily which he admits is not possible for the individual investor, If the equity market rises, they sell and move it into fixed income, If the markets are down, they bring more money into equities, Such a strategy has enabled Yale to comfortably out perform the market in the long run, while avoiding the extreme highs and lows,

This book has political implication, He suggests that schemes like privatizing social security would be a windfall for the mutual fund industry and would not serve the individual investor, This industry has already received a windfall in most companies shifting from a defined pension plan to a selfdirected plan, such as with the/programs.
As an investment guru, he is highly attuned to investment schemes where the fundâs interest is not always aligned with the investor such as mutual fund companies wooing companies foraccounts.
Furthermore, heâs also critical of companies like Morningstar, thatâs supposed to provide nonbiased ratings of funds but often fail to serve the public.
Although he doesnât address this, this critique seems right on in our recent market turmoil, where bonds had high ratings but were stuffed with subprime mortgages.


I donât recommend this book if you are looking to start investing, But if you want a deeper understanding of the investment industry, I would recommend this book, He seems to go overboard selling the idea that he mutual fund industry fails to serve the individual investor, Reading all the details of tax implications which if youâre in an IRA or/you donât have to worry about and of fees which gets us all, is tiring, but also enlightening.
I look forward to reading his updated Pioneer Portfolio Management when it comes out in January, .