Yale CIO David Swensen on Investment Track Records

A couple of years ago, David Swensen was interviewed at the Council on Foreign Relations.

Near the end, he was asked about his views on evaluating the character of a new fund manager who is too young to have a track record.

You know, the testing for character is largely subjective. One of the things we try to do is to spend time with prospective managers in a social setting, so it’s not just sitting across one another at a conference table. But by the time I’m having a final meeting before deciding whether or not we’re going to move forward, I’m thinking to myself during the entire meeting: Is this an individual that I want to be my partner? And it’s subjective, it’s gut feel, but that’s the most important criterion as far as—as far as I’m concerned.

You know, I think—I think track records are really overrated. Some of Yale’s best investments have been with people that don’t have a track record. We took a couple of people out of proprietary trading at Goldman Sachs 25 years ago. If they had had a track record, it wouldn’t really matter because Goldman Sachs has a very different form of organization and a different way of giving resources to the people that are making investment decisions. But we didn’t even have those numbers. And it was really just a decision that this was a woman and this was a man that we thought were going to produce great returns, and they’ve done a really good job for the university.

Bob [Rubin] and I were talking about—at lunch about a student of mine who 12 years ago set up a fund in China having never managed a portfolio of Chinese equities. And we started out small with a $25 million contribution, but over the last 12 years this individual has added $1.3 billion of gains to the university from doing an extraordinary job in an incredibly inefficient environment.

And a number of years ago one of Julian Robertson’s colleagues split off. When we backed him, he had a 3×5 card that had an organization chart on it that said he was going to hire five people. And he turned out to be one of the most successful hedge fund managers of the past 20 years.

So it doesn’t mean we don’t like to look at track records. It’s a nice thing to have. But we would miss out on some incredible investment opportunities if we required three years of audited or five years of audited returns before backing somebody.

A Conversation with David Swensen, Council on Foreign Relations

In March, Provost Ben Pollack toured the construction projects on campus.

This is a particularly interesting moment in Yale’s recent period of physical transformation, with three of our biggest projects slated for completion in the next 18 months. A few weeks ago, I had the chance to visit these three sites — the Schwarzman Center, 320 York Street, and the Yale Science Building — to see the progress first hand and learn from the experts what each project entails. A small group of us, wearing hard hats, eye protection, and neon safety vests, gaped at the cavernous refurbishment-in-progress of Commons and the new spaces that will be constructed underneath the main floor. We descended to 20 feet below the original foundations of the Hall of Graduate Studies, into the excavated space below the courtyard that will house a new auditorium and film screening room, to crane our necks up toward the newly named David Swensen Tower [emphasis added]. We looked out from the atrium lobby surrounding the future O.C. Marsh Lecture Hall onto the soon-to-be-transformed Sachem’s Wood on Science Hill. And at each stop along the way, we learned about the hidden layers of history that are emerging — and being preserved — at each of these buildings.

What better way to honor the Chief Investment Officer that has made $27.1 billion for the school in the past 20 years?

Facilities update: Put on your hard hats!, YaleNews

The newly renamed David Swensen Tower at the Hall of Graduate Studies on Yale campus.
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Post by Marcelino Pantoja