Back in 2000, David Swenson, the former head of the Yale endowment, wrote his seminal book Pioneering Portfolio Management. Yale really shook up endowment investing. In the 80s / 90s, it allocated a very large portion of its funds to Alternative assets. Namely corporate private equity, real estate private equity, and venture capital. Its results have stomped the competition, and the market at large.
In that, Swenson “dared to be different.” His portfolio wouldn’t likely have been approved elsewhere, and most wouldn’t be willing to risk looking like a fool if his strategy did not work.
In that vein, one can’t expect to have good investment performance versus a benchmark if the portfolio for the most part resembles or is highly correlated to the benchmark. Today, Alternatives are permeating insurers, endowments, and even retail investors. Thus, the Swenson strategy has finally arrived and with it, one can presume its advantage is diminishing.
So the question is, what is the next level of portfolio strategy that will shine over the next 20-30 years? TBD.