David Swensen, legendary CIO of the Yale Endowment appeared in a full length interview on Consuelo Mack's Wealthtrack on May 22. 2009. In it, he discusses among other things, his updated recommendations for individual investors. Swensen reminds us of Jeremy Grantham, a dedicated practitioner who could care less about the investment spotlight, and would most likely prefer to be left alone to do what he loves best. Investing.
Click play to watch. For a transcript of Part 1, click here.
This is an enlightening interview, as Swensen shares his candid views on investing, and what is required for investment success.
Here are Swensen's recommendations for individual investors. Canadian investors may want to substitute for the Canada equity bias on the US stocks allocation. Substitute for Canada Bonds and Canada Real Return Bonds to reduce the currency risk.
30% US stocks
15% treasury bonds
15% TIPS
now 15% REITs
15% foreign developed equities
now 10% emerging markets
Swensen has reduced the REITs allocation by 5% and raised the Emerging Markets allocation from 5% to 10%. By the way, Swensen made these long view asset allocation adjustments at the beginning of the year, and not last week, so given that emerging markets are outperforming G7 country equity markets, his call early in the year, to individual investors, to overweight them was reliable.
Swensen remarked that diversification fails during crises - it did in 1987, 1998 and last year. He also discusses the idea that while he is religiously a bottom-up investor, crises force you to look at top-down considerations.
This is a must see interview and Swensen provides much food for thought in this meaty interview.
