David Swensen’s portfolio (from Unconventional Success) – 2017 Update

DavidSwensen

David Swensen, investment manager of the Yale University Endowment Fund, has addressed how investors should set up and manage their investments in his book, Unconventional Success: A Fundamental Approach to Personal Investment.

The Swensen portfolio consists of six core asset class allocations:

  • US equity: 30%
  • Foreign developed equity: 15%
  • Emerging market equity: 5%
  • US REITS: 20%
  • US Treasury bonds: 15%
  • US TIPS: 15%

Although the recommended portfolio splits its allocation with 70% equities/ 30% fixed income, the portfolio can be adjusted to reflect alternative equity/bond allocations.

The charts below (click images to enlarge) show portfolio allocations. The accompanying table provides 2016 returns for these portfolios. Note that returns for portfolios holding admiral shares would produce a return enhancement of approximately 0.10% and that a different weighting of international stocks would result in differing returns.

Year 70/30 60/40 40/60 20/80
2017 13.44% 12.89% 9.41% 5.80%

Fund selections

The tables below show returns for the Swensen portfolios, using Vanguard investor shares for the asset class selections.¹ The return series begins in 2001, when Vanguard initiated an inflation protected securities fund.

The fund selections include:

Funds

Asset class Fund Investor shares Expense ratio Admiral shares Expense ratio
US equity Total market index VTSMX 0.15% VTSAX 0.04%
Developed market equity Developed market index VDVIX 0.17% VTMGX 0.07%
Emerging market equity Emerging markets index VEIEX 0.32% VEMAX 0.14%
US real estate REIT index VGSIX 0.26% VGSLX 0.12%
US treasury bond Intermediate treasury fund VFITX 0.20% VFIUX 0.10%
US TIPs Inflation protected securities fund VIPSX 0.20% VAIPX 0.10%

Returns

The tables below give annual returns, compound returns, and standard deviations for the Swensen portfolios, using returns for Vanguard investor share fund selections.¹ Keep in mind that past performance does not forecast future performance.

Annual returns

Year 70/30 60/40 40/60 20/80
2017 13.44% 12.89% 9.41% 5.80%
2015 -1.20% -0.96% -0.80% -0.48%
2014 8.66% 8.08% 6.66% 5.37%
2013 11.35% 9.03% 3.83% -1.09%
2012 13.57% 12.30% 9.78% 7.25%
2011 1.26% 2.83% 5.61% 8.56%
2010 14.57% 13.42% 11.21% 8.98%
2009 26.25% 22.88% 17.19% 10.82%
2008 -26.57% -21.94% -12.98% -3.87%
2007 7.98% 8.16% 9.29% 9.66%
2006 17.33% 15.07% 10.69% 6.24%
2005 9.56% 8.41% 6.58% 4.52%
2004 15.77% 14.31% 11.53% 8.68%
2003 27.87% 24.50% 18.22% 11.70%
2002 -4.20% -1.44% 4.21% 9.80%
2001 -2.74% -1.30% 1.70% 4.64%

Compound returns

Period 70/30 60/40 40/60 20/80
3yr CAGR 6.63% 6.06% 4.60% 3.12%
5yr CAGR 8.33% 7.05% 4.85% 2.71%
10yr CAGR 6.03% 5.45% 4.92% 4.28%
15yr CAGR 8.81% 8.21% 6.97% 5.57%

Standard deviation

Period 70/30 60/40 40/60 20/80
3yr STdev 6.89% 6.94% 5.15% 3.26%
5yr STdev 5.41% 5.08% 3.79% 3.29%
10yr STdev 13.02% 11.29% 7.18% 4.64%
15yr Stdev 12.01% 10.48% 7.15% 4.55%

Sharpe Ratio

Period 70/30 60/40 40/60 20/80
3yr Sharpe Ratio 0.99 0.89 0.91 0.96
5yr Sharpe Ratio 1.57 1.42 1.32 0.82
10yr Sharpe Ratio 0.48 0.49 0.60 0.80
15yr Sharpe Ratio 0.68 0.71 0.82 0.97

See David Swensen portfolio , google drive spreadsheet for return computations.

Note

¹ The developed market fund selection, VDVIX, has historically been the Tax-Managed International fund until a fund merger in 2013.  Over its history, this fund has essentially been offered as an admiral share class so we use the admiral share returns sequence for this allocation.

About

Barry Barnitz, administrator of both the Bogleheads® wiki and of Financial Page, a Bogleheads® blog

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Posted in Market statistics, Portfolios
January 2018
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