David Swensen, highly respected head of the Yale Endowment always had interesting views on investing. As was clear from his book for indvudyak investors, Unvonventional Success abd his book for institutional investors Unconventional Success (just revised) he thinks the investment industry often doesnt have the best interests of the investor in miond, I couldn't agree more. From the article in the Financial Times.
Top investor calls for Wall St 'moderation'
By Deborah Brewster in New Haven
Published: January 26 2009 02:00 |
The financial crisis has exposed greed, predatory behaviour and conflicts of interest in Wall Street banks and investment firms, one of the top investors in the US has said.
David Swensen, the chief investment officer of Yale University's endowment - who has achieved near-legendary fame as an investor, said he hoped some "moderation of compensation" on Wall Street would be a result of the crisis.
"Even if the returns they generated were real, they were paid too much, and in the context of the absolutely disastrous performance of these institutions their pay was obscene," he said....
In the 25 years since he took the helm, Mr Swensen turned the traditional endowment model, which had 80 per cent of the money in US stocks and bonds, on its head, putting most of the money into private equity, hedge funds, non-US securities and property.
Despite allocating money to 100 managers, he is highly critical of the money management industry.
Mr Swensen recently revised his book - Pioneering Portfolio Management - that outlines his philosophy and packed it with recent examples of venality.
Fortress, Goldman Sachs, Microsoft, Morgan Stanley and large buy-out funds are among those which he criticises for self-interested actions at the expense of their investors....
"This bad, predatory behaviour - unilaterally changing marks, asking for more collateral, etc - it seems the financial crisis stripped off this veneer and caused them all to behave in more venal ways," said Mr Swensen.
"The overwhelming number of investors fail because the fees charged by the investment management industry are egregious relative to the amount of value that is added. It is really quite stunning," he said.
Mr Swensen said nobody at all should use hedge funds of funds, which take investor money and, for an additional fee, allocate it to a range of hedge funds.
"You can't make sensible investment decisions with fund of funds or consultants. Madoff is just a great example of the dangers of making an investment and not understanding where the money is going."
He said the $17bn Yale endowment was shifting as much available money as possible into distressed debt.
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