Pioneering Portfolio Management: An Unconventional Approach to Institutional Investment, Fully Revised and Updated

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.

Pioneering Portfolio theory is a must read. As other reviewers have said it's essential for any endowment manager. However, it's also a great read for those not interested in asset management. Besides being a fantastic overview of different asset classes and how to think about them, Swensen talks at length about alignment of incentives, how to balance the qualitative and quantitative, and how differing timeframes influence your decisions. All of which are huge components of the decisions anyone makes that often aren't thought about rigorously.

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.

This is an excellent resource. In the Kindle version, I believe there is an error in table 4.4. It appears the data in the columns "Third Quartile" and "Range" are switched. For example, in the row U.S. fixed income, the data for Third Quartile is 0.5% and the data under Range is 6.9%. I believe this data is switched, and should read Third Quartile = 6.9% and Range = 0.5%. I believe the same is true for the rest of the data for these two columns. My opinion is supported by the subsequent discussion in the text, where the author indicates the range between first and third quartile returns for fixed income managers is 0.5%. I could not find a forum to provide this feedback, hence it is here. I hope this information is useful.

Swensen made a mark in investing by investing long term in illiquid alternative assets. He shows that long term investors can do very well as long as they do their homework and be patient. I agree with Swensen's model, which is adopted by many endowments and family offices. However, one caveat of his model is the consideration of cost. When Swensen started the portfolio, alternative investments were not so many and the fees were not so high. Now we have lots and lots of alternative investments, charging quite high fees. Hence, it is important to remember that Swensen's model works given a reasonable fee structure.

Swensen's framework for Endowment Managment remains a thoughtful and clearly articulated look at institutional best practices. A key lesson of his is often overlooked. Each institution is unique, and should not attempt to copy what has been at Yale or other successful investment programs. I would love Swenson to write another book, but my best guess is it would be very similar to the original masterpiece.

A concise, straightforward summary of some of the most important investing ideas from a true legend of the field. A far cry from the dozens of get-rich-quick investing books that too often populate the shelves of bookstores, David Swensen's book instead provides the foundations and principles for how to approach institutional and individual investing for the long term. He's the real deal, and so is this book.

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)

A must-read for long-term institutional investors. Clearly explains the bias towards equities and alternatives at the Yale endowment, while emphasizing that the focus on alternatives is only appropriate for the largest, most skilful and resolute investors. Provides a masterful exposition of how institutions seek to balance investment policy (increasing long-term purchasing power) against spending policy (supporting short- to intermediate-term operational needs). Offers unparalleled insight into the qualitative aspects of investment management, including how to structure investment committee meetings and how to build successful relationships with external investment managers. The appendix (Impure Fixed Income) on why investors should prefer government bonds over corporate bonds - because of the former's superior credit, liquidity, non-callability and alignment of interest with investors - will help many institutions reflect on why they invest in bonds in the first place. Required reading for institutional investors of all sizes and strongly recommended for the serious individual investor.

We can learn a lot on portfolio management from basics to expert level.

Fantastic lecture to all investor!!! Even the personal investor who should behave like caring of his family’s endowment. Great book

Must have in Asset Management

Very reliable. Everything as promised.