David Swensen, investment manager of the Yale University Endowment Fund, has addressed how investors should set up and manage their investments in his book, Unconventional Success: A Fundamental Approach to Personal Investment.
The Swensen portfolio consists of six core asset class allocations:
- US equity: 30%
- Foreign developed equity: 15%
- Emerging market equity: 5%
- US REITS: 20%
- US Treasury bonds: 15%
- US TIPS: 15%
Although the recommended portfolio splits its allocation with 70% equities/ 30% fixed income, the portfolio can be adjusted to reflect alternative equity/bond allocations.
The charts below (click images to enlarge) show portfolio allocations. The accompanying table provides 2015 returns for these portfolios. Note that returns for portfolios holding admiral shares would produce a return enhancement of approximately 0.10% and that a different weighting of international stocks would result in differing returns.
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- 70/30 portfolio
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- 60/40 portfolio
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- 40/60 portfolio
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- 20/80 portfolio
| Year | 70/30 | 60/40 | 40/60 | 20/80 |
|---|---|---|---|---|
| 2015 | -1.20% | -0.96% | -0.80% | -0.48% |
Fund selections
The tables below show returns for the Swensen portfolios, using Vanguard investor shares for the asset class selections. The return series begins in 2001, when Vanguard initiated an inflation protected securities fund.
The fund selections include:
Funds
| Asset class | Fund | Investor shares | Expense ratio | Admiral shares | Expense ratio |
|---|---|---|---|---|---|
| US equity | Total market index | VTSMX | 0.15% | VTSAX | 0.04% |
| Developed market equity | Developed market index | VDVIX | 0.20% | VTMGX | 0.09% |
| Emerging market equity | Emerging markets index | VEIEX | 0.33% | VEMAX | 0.15% |
| US real estate | REIT index | VGSIX | 0.25% | VGSLX | 0.10% |
| US treasury bond | Intermediate treasury fund | VFITX | 0.19% | VFIUX | 0.09% |
| US TIPs | Inflation protected securities fund | VIPSX | 0.19% | VAIPX | 0.09% |
Returns
The tables below give annual returns, compound returns, and standard deviations for the Swensen portfolios, using returns for Vanguard investor share fund selections. Keep in mind that past performance does not forecast future performance.
Annual returns
| Year | 70/30 | 60/40 | 40/60 | 20/80 |
|---|---|---|---|---|
| 2015 | -1.20% | -0.96% | -0.80% | -0.48% |
| 2014 | 8.66% | 8.08% | 6.66% | 5.37% |
| 2013 | 11.35% | 9.03% | 3.83% | -1.09% |
| 2012 | 13.57% | 12.30% | 9.78% | 7.25% |
| 2011 | 1.26% | 2.83% | 5.61% | 8.56% |
| 2010 | 14.57% | 13.42% | 11.21% | 8.98% |
| 2009 | 26.25% | 22.88% | 17.19% | 10.82% |
| 2008 | -26.57% | -21.94% | -12.98% | -3.87% |
| 2007 | 7.98% | 8.16% | 9.29% | 9.66% |
| 2006 | 17.33% | 15.07% | 10.69% | 6.24% |
| 2005 | 9.56% | 8.41% | 6.58% | 4.52% |
| 2004 | 15.77% | 14.31% | 11.53% | 8.68% |
| 2003 | 27.87% | 24.50% | 18.22% | 11.70% |
| 2002 | -4.20% | -1.44% | 4.21% | 9.80% |
| 2001 | -2.74% | -1.30% | 1.70% | 4.64% |
Compound returns
| Period | 70/30 | 60/40 | 40/60 | 20/80 |
|---|---|---|---|---|
| 3yr CAGR | 6.13% | 5.28% | 3.18% | 1.23% |
| 5yr CAGR | 6.57% | 6.15% | 4.96% | 3.85% |
| 10yr CAGR | 6.34% | 6.20% | 5.73% | 5.07% |
| 15yr CAGR | 7.09% | 6.95% | 6.58% | 5.98% |
Standard deviation
| Period | 70/30 | 60/40 | 40/60 | 20/80 |
|---|---|---|---|---|
| 3yr standard deviation | 6.61% | 5.52% | 3.77% | 3.57% |
| 5yr standard deviation | 6.42% | 5.28% | 3.91% | 4.45% |
| 10yr standard deviation | 14.24% | 12.07% | 8.23% | 5.16% |
| 15yr standard deviation | 13.50% | 11.37% | 7.56% | 4.67% |
See David Swensen portfolio , google drive spreadsheet for return computations.
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