Yale University chief investment officer fund strategy (Bloomberg) (01-02-2012)

David Swensen, , the chief investment officer of Yale University’s $19.4 billion endowment, who pioneered an investing style that helped endowments beat markets by using alternative assets such as private equity and real estate, said investors who don’t have access to top managers are best off using index products.

Unless an investor has access to “incredibly high- qualified professionals,” they “should be 100 percent passive -- that includes almost all individual investors and most institutional investors,” he said.

Most active mutual funds are more interested in collecting fees than in boosting returns for investors, Swensen said at the conference, which highlighted Bogle’s work in building up index investing as a low-cost alternative to traditional mutual funds. Yale, returned more than 14 percent annually over the past 20 years, compared with the 13 percent increase at the world’s richest school, Harvard University.

Swensen said he was “happy” with Yale’s hedge-fund exposure, adding that the investments remain a necessary part of the university’s holdings given the “subdued or modest expectations” of stock-market returns.

Yale’s endowment gained 22 percent in the fiscal year ended June 30, compared with a 21 percent increase for Harvard. Columbia University in New York was the best performer among the eight Ivy League schools last year with a 24 percent gain.

Source: Bloomberg