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P David Swensen Yale Individual Investor Portfolio Annual Rebalancinglive (public) 0.72% October 20
David Swensen, the Yale Endowment Manager, proposed this one size fit in all model portfolio for individual investors. The major difference between this portfolio and other conventional portfolios is that it emphasizes international equities (including emerging market equities) as well as real estate investment. Compared with various diversified portfolios, an interesting asset class missing is the commodities, which has been considered to be an excellent anti-inflation diversifier. This is complemented with its emphasis on the inflation-protected treasury bonds. We assume annual rebalance although Swensen actually pointed out that in Yale’s institutional portfolio, they rebalanced daily, which, by his estimate, gave about 1-2% of excessive returns vs. annual rebalancing.
Compared with the Simpler Is Better (SIB) portfolios discussed in an article, one can see that Swensen's six assets exclude the commodities while putting emphasis on using fixed income for the purpose of inflation protection and hedging.
Note: it has been confusing whether Swensen advocated using long term treasury bonds or just an average duration treasury bonds. In his book Unconventional Success: A Fundamental Approach to Personal Investment, he wrote "The purity of noncallable, long-term, default-free Treasury bonds provides the most powerful diversification to investor portfolios". Based on this sentence, it has been interpreted that he meant to use the long term treasury bond. However, recently, a reader posted a reply from David Swensen on this question in morningstar.com, which indicates the average duration of treasury bonds.
The portfolio consists of the following:
- 30% in Vanguard Total Stock Market Index (VTSMX)
- 20% in Vanguard REIT Index (VGSIX)
- 20% in Vanguard Total International Stock (VGTSX) or (15% in VGTSX and 5% in VEIEX)
- 15% in Vanguard Inflation Protected Securities (VIPSX)
- 15% in Vanguard Long Term Treasury Index (VUSTX)
|Asset||Fund in this portfolio||Price change*||Percentage|
|US Equity||VTSMX (Vanguard Total Stock Mkt Idx Inv)||0.95%||28.55%|
|International Equity||VGTSX (Vanguard Total Intl Stock Index Inv)||0.64%||13.26%|
|REIT||VGSIX (Vanguard REIT Index Inv)||1.49%||22.27%|
|EmergingMarket||VEIEX (Vanguard Emerging Mkts Stock Idx)||0.04%||4.70%|
|TIPS||VIPSX (Vanguard Inflation-Protected Secs Inv)||0.07%||14.55%|
|LongTreasury||VUSTX (Vanguard Long-Term Treasury Inv)||0.23%||16.67%|
* Day change on 10/20/2014.
Inception Date: 12/31/2000
|P David Swensen Yale Individual Investor Portfolio Annual Rebalancing||1.4%||8.6%||8.5%||11.8%||10.8%||8.4%|
|VFINX (Vanguard (S&P 500) Index)||1.6%||4.6%||11.2%||19.0%||14.1%||7.7%|
|VBINX (Vanguard Balance (60% stocks/40% bonds)||1.3%||4.3%||7.8%||12.5%||10.4%||7.1%|
* YTD: Year to Date
** AR: Annualized Return
|Last 1 Week*||YTD*(2014)||1 Yr||3 Yr||5 Yr||10 Yr||Inception**||2013||2012||2011||2010||2009||2008||2007||2006||2005||2004||2003||2002||2001|
*: NOT annualized;YTD: Year to Date
**Inception: starting from 02/01/1993
|Asset Allocation Strategy||David Swensen Yale Individual Investor's Portfolio|
|Rebalancing Strategy||Fixed Time Interval Rebalancing|
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