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The Meb Faber Show - Better Investing
MEBISODE: Can We All Invest Like Yale?
Mar 4, 2025
Dive into the world of Yale's legendary endowment model and discover its impact on investment strategies. Explore the principles of diversification and alternative investments that make this approach stand out. Compare Yale's performance to traditional portfolios and see how individual investors can achieve similar success. Learn the intricacies of active management and tailored asset allocation, while understanding the gaps between hypothetical returns and real-world outcomes. Get ready to rethink your investing game!
28:25
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Quick takeaways
- The Yale Endowment model excels due to its equity bias, diversification, and tax considerations, yielding an impressive average annual return of over 13%.
- While individual investors can adopt Yale-inspired strategies and factor investing, they must acknowledge the inherent differences that limit exact replication of the endowment's success.
Deep dives
The Yale Endowment Model
The Yale Endowment model is renowned for its exceptional performance and emphasizes three core principles: an equity bias in portfolio construction, substantial diversification, and careful tax considerations. David Swenson, who was instrumental in the fund's success, managed to achieve an impressive average annual return of over 13% while maintaining lower volatility compared to standard benchmarks. This performance has inspired many investors to adopt similar strategies, yet it’s important to recognize that institutional endowments have advantages like tax exemptions and a long-term investment horizon that typical investors do not possess. Therefore, emulating the Yale model requires not only understanding these principles but also considering the inherent differences between institutional and individual investing.
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Discover
highlights
Listen to the best highlights from the podcasts you love and dive into the full episode