David Swensen Portfolio, Build Yale’s Portfolio With ETFs

The David Swensen portfolio is a powerhouse and offers massive diversification with downside protection. What's not to like? Read on to find out.

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The portfolio of David Swensen is famous. In this article, you find out how to build the investment portfolio of David Swensen and how it has performed.

What is David Swensen’s Portfolio?

David Swensen’s portfolio is exposed to 70% stocks and 30% bonds. It is a high-risk portfolio and can be built with 6 ETFs. For the past 10 years, it has returned 8.62% with a standard deviation of 11.53%. The dividend yield is 2.08%. The 30 year return is 8.99%

Here is how you build David Swensen’s portfolio with ETFs

  • 30.00%  US Total Stock Market (VTI)
  • 20.00%  REITs (VNQ)
  • 5.00%    Emerging Markets (VWO)
  • 15.00%  International All-World ex-US (VEU)
  • 15.00%  Intermediate-Term Treasuries (VGIT)
  • 15.00%  TIPS (VTIP)

What is the investment return of David Swensen’s portfolio?

NameAsset class countYear to dateReturn in 201910 year returnCAGR since 1989 (%)Risk levelExpense ratio
David Swensen Portfolio6-5.2721.438.62%8.9920.07%

Who is David Swensen?

David Swensen is the renowned investment manager of Yale University’s Endowment Fund. He almost single-handedly pioneered the massive diversification in alternative assets for endowments and large institutions.

He is the author of the fantastic book Unconventional Success. In the book, he outlines the portfolio below. The portfolio is known for its simplicity and its strong diversification. It is also known to do well in most market climates.

David Swensen’s book belongs in the canon of investment literature. It is absolutely required reading if you want to learn about investing.

“When you look at the results on an after-fee, after-tax basis, over reasonably long periods of time, there’s almost no chance that you end up beating the index fund.”

As a kicker, David Swensen has the average investor’s interest in mind. He is known for calling out unscrupulous investment fees and corrupt investment practices. He is a strong advocate of low-cost index funds.

David Swensen is a clear runner up for being one of the good guys in investing.

Let’s take a look at how David Swensen has constructed a high performing portfolio that takes the best of this thinking from the Yale Endowment model.

We’ll start by taking a look at how it has performed.

What is David Swensen’s Yale Endowment Portfolio?

The portfolio is simple, and you can build it with only 6 ETFs. The portfolio contains all the important asset classes without any bad ones. We consider holding gold and commodities detrimental to getting good returns.

The portfolio holds 30% in bonds. Because of 3o% bonds, it is a conservative portfolio, especially when interest rates are so low (2020).

There are quite a few other portfolios that may interest you. The most obvious choice would be one of Rick Ferri’s Core Four portfolios.

Historical returns of the David Swensen portfolio. Source: portfoliovisualizer.com

Building the portfolio(s)

Below you can see the asset allocations for the portfolio(s). You can also see if the portfolio(s) has a socially responsible investing (ESG) variant portfolio. You can read more about socially responsible investing (ESG) investment portfolios in this post.
To build the portfolio(s) yourself, go to our best in class ETF page to see which ETF you should choose for a particular asset class. There you can also see which socially responsible investing ESG ETFs you should select.

What is the asset Allocation for David Swensen’s Portfolio?

Here is the asset allocation for David Swensen’s Portfolio.

  • 30.00%  US Total Stock Market (VTI)
  • 20.00%  REITs (VNQ)
  • 5.00%    Emerging Markets (VWO)
  • 15.00%  International All-World ex-US (VEU)
  • 15.00%  Intermediate-Term Treasuries (VGIT)
  • 15.00%  TIPS (VTIP)
david-swensen-unconvenstional-success-portfolio

“Six asset classes provide exposure to well-defined investment attributes.”

How we select the right ETFs

There are a lot of ETFs out there. Most of them can be discarded because:

  • They are too expensive
  • They hold too few assets and are therefore too illiquid
  • They do not meet the criteria for representing the asset class they are supposed to mirror.

We have carefully selected an ETF for each asset class that the portfolios on portfolioeinstein.com use. If you want to read more about our selection process and see what we consider the best ETFs please visit our article What Is The Best ETF?

If you are a European investor you need to buy European ETFs. We list 47 best ETFs in our article What Are The Best ETFs For European Investors? (Here Is 47).

As of 2020 we also track socially responsible investing ESG portfolios. Socially responsible investing (ESG) portfolios prioritize investing that puts an emphasis on environmental, social and corporate governance issues.

You can find the socially responsible investing ESG ETFs in the same article.

What are the advantages and disadvantages of David Swensen’s Portfolio?

Advantages:

  • The David Swensen portfolio is a portfolio from one of the giants in the investment world.
  • The Swensen investment portfolio is diversified so that it will perform well in most investing climates.
  • The portfolio has conservative allocations, so you may not suffer massive drawdowns.
  • You can feel safe in that you are taking the advice of one of the good guys in investing.
  • The investment portfolio is easy to implement and maintain with only five asset classes. You only need 6 ETFs.

Disadvantages:

  • The portfolio may is too conservative with its 30% emphasis on bond allocation.
  • The David Swensen portfolio maybe too overweighted in real estate (REITs) for some people.
  • You may want a more fine-grained portfolio with more asset classes (a more sliced and diced portfolio)

Resources

You can find David Swensen’s book here. It is very recommended.

Get a one hour course on investing with David Swensen below.

Suggestions for your next steps

Finding the correct portfolio is hard. Maintaining your portfolio is also daunting. If you are still in doubt about which portfolio to choose, we suggest you read our article How To Invest Money: 5 Simple Steps That Work For Anyone

If you have already committed to a portfolio – good for you! If you need help maintaining the portfolio you will find our rebalance worksheet useful. Rebalancing your portfolio lowers your risk and may even provide higher returns in the long run.

You can find the rebalance worksheet in our article Here Is The Most Easy To Use Portfolio Rebalance Tool

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