David Frederick Swensen (January 26, 1954 – May 5, 2021) was an American investor, endowment fund manager, and philanthropist. He was the chief investment officer at Yale University from 1985 until his death in May 2021.
Swensen was responsible for managing and investing Yale's endowment assets and investment funds, which totaled $25.4 billion as of September 2016. As of September 2019 the total amount is $30.3 billion. He was considered to be the highest-paid employee in Yale, leading a team of about 30 employees. He invented The Yale Model with Dean Takahashi, an application of the modern portfolio theory commonly known in the investing world as the "Endowment Model." His investing philosophy has been dubbed the "Swensen Approach" and is unique in that it stresses allocation of capital in Treasury inflation protection securities, government bonds, real estate funds, emerging market stocks, domestic stocks, and developing world international equities.
His investment success with the Yale Endowment has attracted the notice of Wall Street portfolio managers and other universities. "He's right up there with John Bogle, Peter Lynch, [Benjamin] Graham, and [David] Dodd as a major force in investment management," says Byron Wien, a longtime Wall Street strategist. Investment heads from universities such as Harvard, MIT, Princeton, Wesleyan, and the University of Pennsylvania have adopted his allocation strategies to mixed success. Under Swensen's guidance the Yale Endowment saw an average annual return of 11.8 percent from 1999 to 2009. As of the 2016 fiscal year, Yale's endowment had risen by 3.4%, the most out of any Ivy League school, according to Institutional Investor.
Swensen was listed third on aiCIO's 2012, a list of the 100 most influential institutional investors worldwide. In 2008, he was inducted into Institutional Investors Alphas Hedge Fund Manager Hall of Fame.
Early life and education
David Frederick Swensen was born in Ames, Iowa, on January 26, 1954, and was raised in River Falls, Wisconsin. His father, Richard David "Dick" Swensen, was a chemistry professor and dean at the University of Wisconsin-River Falls. His mother, Grace Marie (Hartman), after raising six children, became a Lutheran minister. After graduating from River Falls High School in 1971 Swensen elected to stay in his hometown of River Falls and receive his B.A. and B.S. in 1975 from the University of Wisconsin-River Falls where his father Richard Swensen was a professor. Swensen pursued a PhD in economics at Yale, where he wrote his dissertation, A Model for the Valuation of Corporate Bonds. One of Swensen's dissertation advisers at Yale was James Tobin, a top economic adviser to John F. Kennedy administration and a future Nobel Prize laureate in economics. According to Charles Ellis, founder of Greenwich Associates and former chair of Yale's investment committee, "When it snowed, David went to Jim's house to shovel the sidewalk". James Tobin's Nobel Prize, among other things, was for his contribution in creation of Modern Portfolio Theory. Swensen was fascinated by the idea of Modern Portfolio Theory. During his 2018 reunion speech Swensen said: "For a given level of return, if you diversify you can get that return at lower risk. For a given level of risk, if you diversify you can get a higher return. That's pretty cool! Free lunch!"
Investment career
Swensen began his investment career in the early 1980s, and has since advised the Carnegie Corporation, 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 (TIFF), the Edna McConnell Clark Foundation, and the States of Connecticut and Massachusetts.
Salomon Brothers
Following his academic interest in valuation of corporate bonds, Swensen joined Salomon Brothers in 1980. This career move was suggested by a Salomon Brothers investment banker and Yale alumni, Gene Dattel, who was deeply impressed by Swensen. In 1981 Swensen worked as an associate in corporate finance for Salomon Brothers to structure the world's first currency swap agreement, a deal between IBM and the World Bank which allowed IBM to hedge their exposure to Swiss francs and German marks and the World Bank to make loans in those currencies more efficiently.