On May 6, Yale University released the news that David Swenson, an investment guru and chief investment officer of Yale University, died of cancer on the 5th at the age of 67.
Yale University posted a letter of condolence on its official website, in which President Subid said that David Swenson died yesterday (May 5, local time) evening after a long and courageous battle with cancer.
Subid noted that David Swenson revolutionized the landscape of institutional investment, and his ideas had a profound impact beyond Yale. As a natural mentor, he has nurtured a generation of institutional investors:
David Swensen
Date:
Thursday, May 6, 2021
Dear Members of the Yale Community,
I write with profound sadness to share the news that David Swensen, Yale’s chief investment officer, died yesterday evening after a long and courageous battle with cancer. David served our university with distinction. He was an exceptional colleague, a dear friend, and a beloved mentor to many in our community. Future generations will benefit from his dedication, brilliance, and generosity.
After receiving his Ph.D. in economics from Yale in 1980, David worked for Salomon Brothers and Lehman Brothers before returning to Yale in 1985 to lead our investments office. With his guidance, Yale’s endowment yielded returns that established him as a legend among institutional investors. Over the years, he lectured in Yale College and the School of Management. On Monday, he and long-time friend and colleague Dean Takahashi taught the last class of the term for Investment Analysis, a seminar they co-instructed for thirty-five years. David was an incorporator of the Elizabethan Club and a fellow of Berkeley College. In fact, he was a first-year counselor in Berkeley when he was studying for his doctorate at Yale, and he maintained connections with the people he counseled all those decades ago.
David’s ideas reverberated beyond Yale as he revolutionized the landscape of institutional investing. His approach, which has become known as the “Yale Model,” is now the standard for many university and foundation endowments. A natural teacher, he prepared a generation of institutional investors who have gone on to lead investment offices at other colleges and universities, further extending the scope of David’s influence. As the author of two books (Pioneering Portfolio Management: An Unconventional Approach to Institutional Investment and Unconventional Success: A Fundamental Approach to Personal Investment), he shared his insights and experiences with a wide readership.
David believed deeply in Yale’s mission of education and research, and he dedicated his professional life to stewarding and growing the university’s endowment so it could support Yale’s vital work in the world. In 2007, he was awarded the Mory’s Cup for conspicuous service to Yale, and in 2012, he received the Yale Medal for outstanding individual service to the university. In 2014, he was presented with an honorary doctor of humane letters at Yale’s commencement. The Swensen Initiative, established by my predecessor Rick Levin, recognizes David’s contributions to Yale. The effort has raised over $35 million to support activities, projects, and people that were especially meaningful to David, including financial aid, faculty, and athletics.
David was a kind, generous, and intensely principled friend, and some of my most enduring memories of him center around his wholehearted devotion to Yale athletics. A loyal, passionate fan, David loved to cheer on the Bulldogs at the Bowl or from the sidelines of a tennis match, and he combined his passion for sports with philanthropy. An avid tennis player, he hosted the annual “Swensen Tennis Extravaganza,” each year at the Connecticut Open with Rick Levin and then with me. The event, which included golf as well, raised millions of dollars for Yale’s community-based partnerships. Although he made his home in Connecticut for many years, David remained true to his Wisconsin roots and his beloved Green Bay Packers.
Beyond Yale, David was a thoughtful, trusted advisor to many. He was a fellow of the American Academy of Arts and Sciences and a member of the Council on Foreign Relations, and he advised President Barack Obama as a member of the President’s Economic Recovery Advisory Board. Over the years he served as trustee or advisor to the Brookings Institution, Cambridge University, the Carnegie Corporation, the Carnegie Institution of Washington, the Chan Zuckerberg Initiative, the Hopkins School, TIAA, the New York Stock Exchange, the Howard Hughes Medical Institute, the Courtauld Institute of Art, the Yale New Haven Hospital, the Investment Fund for Foundations, the Edna McConnell Clark Foundation, and the States of Connecticut and Massachusetts.
David will be remembered at Yale and beyond our campus. Please join me in expressing our collective appreciation for his lifelong commitment to Yale and in extending our most heartfelt condolences to his wife, Meghan McMahon, and their family.
Sincerely,
Peter Salovey
President
Chris Argyris Professor of Psychology
Yale University Memorial Letter
As a student of David Swenson and the founder and CEO of Hillhouse Capital, Zhang Lei posted a message in the early morning to mourn his mentor, lamenting that "the legend never ends".
David Swenson and Lei Zhang
As The Yale Principal put it, David Swenson is a godfather in the investment world.
Barton Biggs, former chairman of Morgan Stanley Investment Management, said: "There are only two truly great investors in the world, and they're David Swenson and Warren Buffett. Vanguard founder John Borg commented: "David Swenson is one of only a few investment geniuses on the planet. ”
As one of China's most successful investors, Hillhouse Capital's Career began with excellent basic research, a breakthrough that occurred when the Yale Endowment admitted him as an intern.
"Many times in life, the heavens inadvertently opened a window for you, and you happen to be there, in a sense, the Yale Investment Office positioned the coordinate system of my future career and made me decide to enter the investment industry." 」 ——Zhang Lei, "Value"
It wasn't a routine arrangement at the time, as the Yale Endowment Fund doesn't normally accept MBA students as interns, but Zhang Lei impressed Chief Investment Officer David Swenson. "Almost immediately, it was clear that Mr. Zhang was brilliant and had extraordinary insights," said Dean Takahashi, a senior director of the Yale Endowment Fund, who said Mr. Zhang could see which companies could be great. ”
Interning in the Yale office allowed Zhang Lei to truly understand the nature of the financial system from the perspective of investment, including supply and demand allocation, risk management, payment and clearing, and more importantly, to improve the company's governance structure, which allowed Zhang Lei to build an independent research system and master the ability to find unique perspectives to observe and judge. In 2005, Zhang Lei, who received an MBA, persuaded the Yale Endowment Fund to give him $20 million to invest in Emerging Chinese companies.
My first meeting with David Swenson was in class, but the close-up meeting was in the interview room of the Yale Investments office. He was a smiling, slightly serious man, and he was not surprised by an international student from China. He asked me a lot of questions about investing, and when I honestly answered "I don't know" to most of the questions, he was a little surprised by my honesty. Probably because of this, I got this invaluable internship opportunity, because in his opinion, honesty is particularly important. ——Zhang Lei, "Value"
Compared with warren Buffett, the titular "stock god," David Swenson, chief investment officer of the Yale Endowment Fund, is not well-known in China, but he has had a profound impact on the development of institutional investment.
Swenson had a legendary history, earning his Ph.D. in economics from Yale University under the tutelage of Nobel Prize-winning economist James Tobin. Tobin was the pioneer of asset selection theory, and Swenson drew a lot of nourishment directly from him, which was the basis for Swenson's later innovative diversified portfolio theory.
After graduating with a Ph.D., the 27-year-old Swenson began to make a name for himself on Wall Street, working for Lehman Brothers for 3 years and Salomon Brothers for 3 years, when his main job was to develop new financial technologies. While working at Salomon Brothers, he constructed his first swap trade.
In 1985, at the invitation of his mentor, Swenson resolutely gave up his well-paid wall Street investment banking job and returned to his alma mater, and for decades in the quiet town of New Haven, he conscientiously took on the financial responsibility of Yale University, and part-time as a professor at the Yale School of Management, passing on his many years of investment management experience to students. In his opinion, there are many important things in life that cannot be measured in money.
In the more than 30 years since then, Swenson single-handedly built the Yale Endowment Fund into an "evergreen fund empire", through the "Black Monday" of the United States in 1987, the economic stagnation in the late 1980s, the "Clinton boom" and the high-tech wave in the 1990s, the Internet boom and bubble around 2000, and the recent global economic weakness and continuous market decline, the assets of the Yale Endowment Fund have continued to expand, from $1.3 billion at the beginning of his tenure. Growing to $30.3 billion in June 2019, an increase of more than 22-fold, with an annualized yield of 11.1% over the past 10 years and an annualized return of 11.4% over the past 20 years, it is one of the world's best-performing institutional investors in the long term and has received a lot of attention from the fund management community and Wall Street.
"David Swenson was accustomed to a frugal life and wanted to be a man of conscience, not to serve to make money. In his view, the goal of investment is to make a profit or to achieve some kind of social ideal, and the balance between them must be grasped, and Yale will only give money to people who have extremely high ethical standards, abide by the professional ethics of investors, and put fiduciary obligations first. He brought to Yale University not only material wealth, but also a noble spiritual temperament." ——Zhang Lei, "Value"
In Zhang Lei's view, Swenson's most important contribution is not only to share the innovative Yale investment model with major institutional investors, but also to cultivate countless investors who uphold the belief of value investment. He truly fulfilled the noble mission of higher education – to help others achieve a better version of themselves.
When it comes to investment management, David Swenson adheres to two important tenets – reverse thinking and long-term behavior. The Yale Endowment Fund, led by Swenson, has four distinguishing features:
First, an independent and rigorous investment analysis framework. The biggest feature of institutional investors is the ability to build a systematic investment analysis framework, first fully consider the investment purpose, asset-liability balance, asset class division and allocation, capital forecasting, investment varieties and financial instrument selection, risk control and other elements, and then select the fund manager, and finally make the specific choice of individual investment targets.
When constructing a portfolio, there is a great emphasis on stress testing, and all expected returns are subject to various nightmare scenario assumptions. More importantly, this complete investment framework is not affected by market sentiment, it is an objective and rational choice.
Second, a clear asset classification and target allocation system. Asset allocation is a core element of Yale Endowment Management, but how to understand the characteristics of the asset class and achieve flexible allocation in line with the objectives is the key.
This "asset rebalancing" theory is fully reflected in David Swenson's investment practice, that is, grasping the essence of investment and avoiding timing operations, so as to achieve reasonable returns.
Third, make the most of alternative investments, especially those asset classes that are not highly priced in the market, such as venture capital, hedge funds, etc. Historically, most institutional investors in the United States have focused their assets on traditional asset classes such as outstanding stocks and bond investments, but the Yale Endowment Fund likes and encourages contrarian thinking.
Based on a deep understanding of the market, yale endowments boldly innovated, entering the private equity market before the vast majority of institutional investors, investing in leveraged buyouts in 1973, venture capital funds in 1976, and creating an absolute-return asset class in the 1980s. Alternative investments have brought fruitful returns to the Yale Endowment Fund for The Visionary, and as a result, they have become increasingly valued by institutional investors.
Fourth, the investment belief in the almost faith and the ultimate trustee spirit. The Yale Endowment Fund maintains a consistent rational mindset, always maintains forward-looking insight into financial markets, and once it is formed, it will be incredibly firm. This persistence stems from its understanding of the laws of financial markets, its grasp of modern financial theory, and its insight into human nature.
In the selection of fund managers, the Yale Endowment Fund uses character as the first screening criterion to prevent the interests of investment managers from deviating from the interests of the ultimate beneficiary. On this basis, it focuses on the interest structure of investment management companies, and stimulates the initiative and efficiency of investment management companies and investment experts through appropriate incentive mechanisms, so that it can be combined with Yale's long-term development goals, and dare to choose investment managers who have just started their careers.
David Swenson believes that an important watershed in the investment community is not to distinguish between individual investors and institutional investors, but between investors who have the ability to conduct high-quality active investment management and investors who are unable to do so. The key to high-quality active management is the mindset." ——Zhang Lei, "Value"
At the Prestige Value Investment Institute event four years ago, Mr. David Swenson delivered a speech on "The Qualities and Qualities Needed by Successful Investors". Finally, share with you the content of his speech. The legend never ends, may you also benefit from the master's ideas:
My name is David Swensen. And I am very pleased to be the Honorary Chairman of the Hillhouse Value Investing Institute.
I'm David Swenson. It is a great honor to be the Honorary Chairman of the Gaoli Value Investment Research Institute.
Investing is one of the most fascinating activities on the face of the earth. Successful investing requires extraordinarily broad range of skills:
Investing is one of the most attractive activities in the whole world. Successful investment requires investors to have a wide range of traits and qualities:
Intellectual curiosity, because nearly everything, everywhere influences the markets.
Curiosity, curiosity, because almost anything, any place, can have an impact on the market.
Raw intelligence, because you need to be as smart as, or smarter than your competitors.
Extremely smart, because you have to be at least as smart or smart as your competitors.
Self-confidence, because when you make a buy decision, or a sell decision, you are basically, betting that the market is wrong.
Confidence, because when you make a buy or sell decision, you are actually betting on the wrong direction of the market.
Humility, because sometimes the market is right.
Be humble, because sometimes the market is right again.
Work ethics, because you are competing against other very hard-workers.
Be engaged because you're competing with a lot of other people who work equally hard.
Judgment, because gathering facts is not enough, you need to draw the correct conclusions.
Judgment, because it's not enough to just collect the facts, you need to draw the right conclusions.
And passion, because if you do not love what you are doing, you lose.
Enthusiasm, because if you don't love what you're doing right now, you're going to fail.
The main reason that I am excited to be associated with Hillhouse Value Investing Institute is Zhang Lei. Zhang Lei exemplifies every one of the attributes that I listed above: intellectual curiosity, self-confidence, humility, work ethics, judgment, and above all, passion.
Mr. Zhang Lei is the main reason why I am very happy to join the Gaoli Value Investment Institute. He gathered all the traits I had enumerated before: curiosity, self-confidence, humility, dedication, judgment and, most importantly, enthusiasm.
Many years ago, Zhang Lei was a student of mine, here at Yale. Today, you and I, are Zhang Lei’s students. Enjoy your studies!
Many years ago, Mr. Zhang Lei was a student at Yale University. Today, like you, I am a student of Zhang Lei. Enjoy your learning journey!
| The above content is synthesized from: Hillhouse Capital, Goldley Value Investment Research Institute, Value Zhang Lei, 21st Century Business Herald, Yale Beijing Center
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