No. of Recommendations: 5
I was surprised to read Yale's Endowment is only 3% Domestic Stocks. Much larger positions in long/short hedge funds and venture capital.

"Today, domestic marketable securities account for less than one-tenth of the portfolio, while foreign equity, private equity, absolute return strategies, and real assets represent over nine-tenths of the Endowment."
http://investments.yale.edu/

Yale 2019 Asset Allocation targets:
26.0% Absolute Return Funds
18.0% Venture Capital
15.5% Foreign Stocks
15.0% Leveraged Buyouts
9.5% Real Estate
6.5% Natural Resources
6.5% Fixed Income and Cash
3.0% Domestic Stocks
https://www.financialsamurai.com/a-look-inside-investment-as...

"The Yale Endowment is one of the most successful institutional investors in the world, averaging an 8.1% annual return over the last decade; through June 2013, Yale’s 25-year average annualized performance topped 13%."
“[Low-cost passive index strategies] make sense for organizations lacking the resources and capabilities to pursue successful active management programs, a group that arguably includes a substantial majority of endowments and foundations,” Yale writes.
"Simply stated, Yale thinks low-cost index funds are good, they are just not good for Yale."
https://finance.yahoo.com/news/yale-slammed-warren-buffetts-...
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No. of Recommendations: 4
The Yale Endowment is one of the most successful institutional investors in the world, averaging an 8.1% annual return over the last decade;

That's rather amusing. I've done better than that, and I don't think my returns have been very good.

Elan
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No. of Recommendations: 2
You made the right call if you over-weighted US stocks 10 years ago, as US stocks outperformed. Yale's Endowment investments included international equities which trailed. A similar benchmark might be the mutual fund Vanguard LifeStrategy Moderate Growth (VSMGX) which today is 36% US stocks, 23% non-US stocks, and 39% bonds. But I think I will stick with US stocks.

from 20080630 to 20180629:
Investment              CAGR  MDD
SP1500EqualWeight 12.8 -53
SP500EqualWeight 11.8 -52
SPY 10.4 -42
SP500MktCapWeight 10.3 -47
60:40 mix of SPY:BND 8.0 -25
YaleEndowment 7.4
VSMGX 6.3 -31
AvgUniversityEndowment 5.5


"The university’s longer-term results remain in the top tier of institutional investors. Yale’s endowment returned 7.4% per annum over the 10 years ending June 30, 2018. Relative to the estimated 5.5% average return of college and university endowments"
https://news.yale.edu/2018/10/01/investment-return-123-bring...

Yale Endowment Asset Allocation over time to 2019:
https://imgur.com/a/CuNGaR3
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No. of Recommendations: 4
That's rather amusing. I've done better than that, and I don't think my returns have been very good.

You don't have 25 Billion to manage. I hear that's hard.

http://tinyurl.com/y3ccmded
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No. of Recommendations: 0
The Yale Endowment is one of the most successful institutional investors in the world, averaging an 8.1% annual return over the last decade;

That's rather amusing. I've done better than that, and I don't think my returns have been very good.


I'm not sure what decade is being referred to. The quoted article appeared in 2017, and if the decade in question is the one from Jan 2006 to Dec 2016, that's a market-bearing return, but not a crushing one.

13.2% over 25 years is pretty impressive, though; especially considering the conservative mandate of endowment managers. I suppose part of the fall-off in recent years (to something approximating a market return) may be owed to the fact that the endowment has grown so large.

Baltassar
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No. of Recommendations: 18
That's rather amusing. I've done better than that, and I don't think my returns have been very good.

You don't have 25 Billion to manage. I hear that's hard.


Fair enough. But that still leaves two points. One, if Yale has one of the best performing endowments, how are the rest doing? And second, you could always invest in an S&P index fund and do better than Yale. So what are the endowment's managers being paid big bucks for?

Elan
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No. of Recommendations: 1
So what are the endowment's managers being paid big bucks for?

Here's another article with some attempt at an explanation:


https://awealthofcommonsense.com/2017/02/how-the-bogle-model...

Why am I so interested? I went to Yale, and it didn't cost my parents or me a cent.
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No. of Recommendations: 5
Here's another article with some attempt at an explanation:
https://awealthofcommonsense.com/2017/02/how-the-bogle-model...


They make some interesting points, but almost all of them are very dependent on an endpoint effect.
That doesn't mean the conclusions are wrong, but face it, at the end of a bull run like this anything OTHER than an index fund looks bad.
It will be more interesting and meaningful to look at the same calculations during or somewhat after the next bear.

The S&P is over 3000. It passed 2000 for the first time only 4.9 years earlier.
It sure didn't rise in value by 50% in 5 years.
If you were riding that, you did well, and look like a smart investor. You also make college endowments look bad.
In reality, you've done too well. Unless the market was oddly cheap five years ago, a hard proposition to defend,
a lot of those mark-to-market returns will prove to have been transient for the LTBH crowd.
If somebody can get similar returns without having relied on multiple expansion, they've done well, as there is no reason to expect mean reversion downwards.
(I'm not saying that Yale did this, but that should be their goal)

The downside of their positioning:
Yale has a huge allocation to some things like LBOs and venture capital and real estate that are not known for, umm, their resistance to cyclical effects.
Nor, oddly enough, is the typical "absolute return" fund. Those three categories account for over half their portfolio.
So, they might do badly in the next downturn, and some of that might be permanent losses.

On the other hand, they aren't total fools.
A fair bit of cash piled up in 2006-2007, and they had none 2008-2009.
Allocation to domestic equities is very low lately, having fallen gradually during the bull.
Those are signs of being a little more aware than most of where prospective returns might be weak.

Jim
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No. of Recommendations: 0
We can easily beat Yale by just paying attention to our own guru's.

For example, Jim keeps
mentioning BRK-A as his go to stock. Suppose we did buy BRK .

In all the periods I could figure out from this thread it had a better
return than Yale's. For instance, the 25 years through June, 2013, Yale had 13%. BRK had
16%.
http://gtr1.net/2013/?s19880628e20130701::BRK-A Yale during the ten year period mentioned, 7.4%, but BRK got
8.8%
http://gtr1.net/2013/?s20080630e20180629::BRK-A

BRK also now has a very big pot of cash to invest-indeed, much larger than Yale's, so it too is growing slower. In the 'old' days, say from 1986 to
2001, it had around 23% CAGR, in spite of an almost 50% draw down just before the
dotcom period. http://gtr1.net/2013/?s19860630e20010629::BRK-A

Lately BRK has been returning about the same as SPY, so one could just buy SPY. Better still QQQ?

Some Fools are sooo... SMART!

rrjjgg
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No. of Recommendations: 17
For example, Jim keeps mentioning BRK-A as his go to stock. Suppose we did buy BRK.
...
Lately BRK has been returning about the same as SPY, so one could just buy SPY. Better still QQQ?



Berkshire's value growth since 1998 has been remarkably steady, with squiggles above and below a typical inflation+8%/year.
But as you note, in market returns the results have been no better than the S&P 500's results.
Berkshire shareholders have done worse than (untaxed) SPY holders in the last 5, 10, or 15 years.
The main reason is that Berkshire has been getting cheaper very gradually for that long, and the S&P gradually more expensive.

Still, any investment case for Berkshire can't be based on reliable outperformance.

For now, any investment case for Berkshire would be based on two useful things:
* BRK is cheaper than usual right now, while the S&P 500 is at an above average multiple right now.
That's actually a pretty big deal, for one making an investment decision today.
* Each year, Berkshire is still rising in value a fair bit faster than the S&P is.
If that continues, then BRK has to outperform at some point unless S&P valuations expand without bound.
Something I have always thought impossible, though the market as yet has offered me no evidence I'm right : )

Buying today at S&P 3017, and selling on a random day 5-9 years from now, I estimate the S&P 500 would get you maybe inflation+1.5%/year as a central guess.
That supposes that the average valuation level since 1995, which encompasses three bubbles, is the new normal.
And that there is a permanent one-time 10% step up in earning power because of the tax cuts not yet showing up in CAPE type methodologies.
I'd expect the return from Berkshire shares starting from here ($312000 per A share, $208 per B) to be maybe 5%/year better, give or take.
(I really expect a bit more than inflation+6.5% for Berkshire from here, but I don't wouldn't absolutely count on it).
Oddly enough, Berkshire's return is far easier to predict than the return from the S&P 500.
I have much better confidence on what sort of multiples we'll see for Berkshire, and it's less cyclical.

Jim
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