Capital Allocators – Inside the Institutional Investment Industry WTT - Short-Term Gain, Long-Term Pain, Part 2
Mar 25, 2023
Dive into the clash between short-term pressures and long-term investment strategies, uncovering lessons from historical events and recent banking turmoil. Explore contrasting risk management tactics used by influential figures in finance, emphasizing the importance of sticking to core principles during stressful times. Discover insights on adapting investment strategies and the potential pitfalls of short-term thinking, all drawing from rich experiences in institutional investment.
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Yale's 1994 Bond Portfolio
- In 1994, David Swensen's bond portfolio at Yale consisted mainly of long-duration treasuries and agency mortgage-backed securities.
- It also included illiquid opportunities like a strip Brady bond and a closed-end fund.
Yale's Steady Approach
- During a volatile year in fixed income, Yale's bond portfolio remained steady, making only minor rebalancing trades.
- They avoided the popular complex derivatives and other innovations, sticking to their strategy.
Private Credit Strategy
- The head of a private credit shop described moving up the capital stack to reduce risk for similar returns.
- This approach contrasts with Swensen's principles, essentially buying high and selling low.