If you pay any attention to the world of institutional investing, you know David Swensen. In just under a quarter century as Yale’s chief investment office, Swensen has generated Madoff-like returns for the university – except that he made his money honestly. When Swensen, at the age of 31, left a well-paid job on Wall Street for Yale in 1985, the endowment was worth a little more than $1 billion. Last June 30, it was worth $22.9 billion.
And since then? Ouch. The endowment has lost nearly $6 million, at last count. Even great money managers have been humbled by the global financial meltdown.
In 2005, I wrote a profile of Swensen (“Yale’s $8 Billion Man“) for the Yale Alumni Magazine. I thoroughly enjoyed spending time with him—he is both soft-spoken and outspoken, a great interview, a smart and widely-admired guy who could have made a ton more money on Wall Street but instead devoted his professional life to serving a great university. We spoke again early this year for this Q&A in the alumni mag, which focuses on the economy and what it means for individual investors.
You can read the full interview here. The newsiest tidbit, which was picked up by my friend and former Fortune colleague Justin Fox on his excellent blog, The Curious Capitalist, came during this exchange about CNBC loud mouth (and Harvard grad) Jim Cramer.
Q: In the new edition of Pioneering Portfolio Management, you write: “Educated at Harvard College and Harvard Law School, Cramer squanders his extraordinary credentials and shamelessly promotes stunningly inappropriate investment advice to an all-too-gullible audience.”
A: Jim Cramer exemplifies everything that’s wrong with the advice — and I put advice in quotation marks — that is given to individual investors. Investing is a serious business. We’re talking about retirement security of American citizens, and he turns it into a game. It’s a game where his listeners lose. It’s ridiculous. These high-turnover, rapid trading strategies enrich the brokers. If you look at Jim Cramer’s approach on an after-fee, after-tax basis, the individual doesn’t have a chance.
Swensen also offers excellent advice for individual investors in the article as well as in his outstanding book, Unconventional Success. He warns against stock-picking, rails against most of the mutual fund industry. lays out his model of asset allocation and recommends index funds sold by not-for-profit companies like Vanguard and TIAA-CREF. Well worth a look…