The David Swensen Asset Allocation Model

Endowment FundDavid Swensen is the famed manager of the Yale Endowment Fund and has been able to generate a 16.3% annualized return during his tenure as fund manager. No easy feat considering that most active portfolio managers are unable to even beat the market.

I know I will never be the investor that Swensen is. His career is investing for the fund and spends each and every waking hour (at least working waking hour) thinking about how to invest the endowment fund’s money. I have another job and manage my portfolio in my spare time. That being said, as an individual dividend investor I know that I can learn from Swensen and did some digging around to see how he investors. There is a tonne of information on blogs and portals on the web so it was not hard to find.

The most important information in my opinion is the asset allocation he recommends to lay-investors like you and me. It is a simple to follow asset allocation and in my opinion anyone can follow it (not that you should of course – do your research). Here is the asset allocation he suggests:

David Swensen Asset Allocation Cot 2009Click to Enlarge

If you want some more asset allocation choices, check out this post or this site. There are a million different scenarios out there. Pick one that meets your needs and stick to it. Your asset allocation is the most important part of your portfolio so pay a lot of attention to it.

(Photo Credit)

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  1. Jordan Bryant says

    Good post. I wonder if he has revised his allocation model since the financial crisis. His high exposure to real estate and low exposure to emerging markets may have led him to miss out on some impressive returns. Was his model simply based on the efficient frontier calculations? Or did he back test this model on historical returns of numerous asset classes?

    Anyways, great post, and I love what you’re doing on the website.

  2. sam says

    I am struggling with asset allocation. At age thirty with no expectation of dipping into my savings (with exception of a 5000 emergency cash account) how should my portfolio be dividend? Equity (CDN, USD, Foreign, emerging), Real Estate (my own home, Real Estate funds/REITS), Fixed income (GIC, Bonds), Cash ??? Any thoughts, Any one


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