David Swensen’s portfolio (from Unconventional Success) – 2018 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 2018 returns for these portfolios. Note that a different weighting of international stocks would result in differing returns.

Year 70/30 60/40 40/60 20/80
2018 -5.67% -4.94% -3.55% -1.82%

Fund selections

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

As of 2018, the fund selections include:

Funds

Asset class Fund Investor shares Expense ratio Admiral shares Expense ratio
US equity Total market index VTSAX 0.04%
Developed market equity Developed market index VTMGX 0.07%
Emerging market equity Emerging markets index VEMAX 0.14%
US real estate REIT index VGSLX 0.12%
US treasury bond Intermediate treasury index fund VSIGX 0.07%
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  fund selections.¹ Keep in mind that past performance does not forecast future performance. Beginning in 2018 we use returns for admiral share classes of portfolio index funds, and investor share class returns for the Vanguard Inflation Protected Securities Fund.

Annual returns

Year 70/30 60/40 40/60 20/80
2018 -5.67% -4.94% -3.55% -1.82%
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 4.69% 4.35% 3.63% 2.66%
5yr CAGR 4.73% 4.27% 3.32% 2.55%
10yr CAGR 8.61% 7.77% 6.00% 4.50%
15yr CAGR 6.69% 6.34% 5.53% 4.67%

Standard deviation

Period 70/30 60/40 40/60 20/80
3yr STdev 9.75% 8.70% 6.64% 4.01%
5yr STdev 7.82% 7.00% 5.41% 3.51%
10yr STdev 8.00% 7.01% 5.32% 4.27%
15yr Stdev 11.60% 9.95% 6.92% 4.51%

Sharpe Ratio

Period 70/30 60/40 40/60 20/80
3yr Sharpe Ratio 0.39 0.39 0.39 0.38
5yr Sharpe Ratio 0.53 0.49 0.49 0.52
10yr Sharpe Ratio 1.03 1.05 1.03 0.94
15yr Sharpe Ratio 0.51 0.54 0.63 0.75

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. Prior  to 2018, we use investor share class returns for portfolio allocations. In 2018 Vanguard reduced the minimum investment for admiral shares in most of the firm’s index fund offerings.

About

Barry Barnitz, administrator of both the Bogleheads® wiki and of Financial Page, a Bogleheads® blog. In addition I serve as an administrator of finiki, the Canadian financial wiki, as an administrator of la Wiki Bogleheads® España, and as an administrator of the John C. Bogle Center for Financial Literacy site.

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