Who Do You Follow? (7/15)

The article below explains that four of the largest endowment funds (Stanford, MIT, Penn, and Princeton) are now managed by former employees of Yale’s CIO, David Swensen.

At InvestableBenchmarks.com, you can follow Swensen’s ETF portfolio prescription which has delivered over 7% annually this past decade.

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Stanford Endowment Manager Loses Staff Amid Strategy Changes

Timothy W. Martin, 7/16/15

It didn’t take long for Robert Wallace to shake up the nation’s fourth-largest endowment at Stanford University.

Four months after the 49-year-old succeeded John Powers as head of the $25 billion Stanford Management Co., several investment employees are leaving amid strategy changes initiated by Mr. Wallace, according to a spokesman.

It isn’t known exactly how many officers are participating in the exodus. A Stanford spokesman declined to comment on the reasons for the departures but said in a statement that “it is not unusual for staff changes to occur following a transition in leadership in an investment organization.” Mr. Wallace “has been working since March on an investment strategy that places different demands on the organization,” the spokesman said.

During 2014, Stanford’s endowment earned a 14.8% return, compared with 15.5% for endowments tracked by the National Association of College and University Business Officers, or NACUBO, and Commonfund. Over the past decade, Stanford Management had an annualized rate of return of 9.9% and increased assets from $10 billion to $25 billion.

Mr. Wallace arrived with a well-known pedigree as former understudy to Yale University investment chief David Swensen , who earned a reputation as one of the world’s most savvy investors with an unconventional approach favoromg hedge funds and private equity over stocks and bonds.

Four of Mr. Swensen’s former employees now run one of the 10 largest endowments in the U.S., according to data compiled by the NACUBO and Commonfund, including Princeton University, Massachusetts Institute of Technology and University of Pennsylvania.

Mr. Wallace controls the largest pool of assets among Mr. Swensen’s former pupils. Stanford, which had $21.4 billion in endowment assets at June 30, 2014, trails in size only Harvard, the University of Texas system and Yale, according to the NACUBO and Commonfund. Including other assets, Stanford Management oversees a total of $25 billion.

Stanford has about 55% of its portfolio in hedge funds and private-equity firms, according to its most recent annual report. That is significantly more than Harvard University’s 34% stake with hedge funds and private equity. Stanford tops even Yale’s 50.4% presence.

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