Description

David Swensen is manager of Yale University's endowment fund. He 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%

Statistics (YTD)

What do these metrics mean? [Read More] [Hide]

TotalReturn:

'The total return on a portfolio of investments takes into account not only the capital appreciation on the portfolio, but also the income received on the portfolio. The income typically consists of interest, dividends, and securities lending fees. This contrasts with the price return, which takes into account only the capital gain on an investment.'

Using this definition on our asset we see for example:
  • Looking at the total return of 38.3% in the last 5 years of Yale U's Unconventional Portfolio, we see it is relatively lower, thus worse in comparison to the benchmark SPY (110.9%)
  • During the last 3 years, the total return, or performance is 28.3%, which is lower, thus worse than the value of 69.3% from the benchmark.

CAGR:

'Compound annual growth rate (CAGR) is a business and investing specific term for the geometric progression ratio that provides a constant rate of return over the time period. CAGR is not an accounting term, but it is often used to describe some element of the business, for example revenue, units delivered, registered users, etc. CAGR dampens the effect of volatility of periodic returns that can render arithmetic means irrelevant. It is particularly useful to compare growth rates from various data sets of common domain such as revenue growth of companies in the same industry.'

Using this definition on our asset we see for example:
  • Looking at the annual return (CAGR) of 6.7% in the last 5 years of Yale U's Unconventional Portfolio, we see it is relatively lower, thus worse in comparison to the benchmark SPY (16.1%)
  • Compared with SPY (19.3%) in the period of the last 3 years, the compounded annual growth rate (CAGR) of 8.7% is lower, thus worse.

Volatility:

'Volatility is a statistical measure of the dispersion of returns for a given security or market index. Volatility can either be measured by using the standard deviation or variance between returns from that same security or market index. Commonly, the higher the volatility, the riskier the security. In the securities markets, volatility is often associated with big swings in either direction. For example, when the stock market rises and falls more than one percent over a sustained period of time, it is called a 'volatile' market.'

Applying this definition to our asset in some examples:
  • The volatility over 5 years of Yale U's Unconventional Portfolio is 11.9%, which is lower, thus better compared to the benchmark SPY (17.5%) in the same period.
  • Looking at 30 days standard deviation in of 12.2% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (17.5%).

DownVol:

'The downside volatility is similar to the volatility, or standard deviation, but only takes losing/negative periods into account.'

Using this definition on our asset we see for example:
  • The downside deviation over 5 years of Yale U's Unconventional Portfolio is 8.3%, which is lower, thus better compared to the benchmark SPY (12.1%) in the same period.
  • During the last 3 years, the downside deviation is 8.2%, which is smaller, thus better than the value of 11.5% from the benchmark.

Sharpe:

'The Sharpe ratio (also known as the Sharpe index, the Sharpe measure, and the reward-to-variability ratio) is a way to examine the performance of an investment by adjusting for its risk. The ratio measures the excess return (or risk premium) per unit of deviation in an investment asset or a trading strategy, typically referred to as risk, named after William F. Sharpe.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark SPY (0.78) in the period of the last 5 years, the Sharpe Ratio of 0.35 of Yale U's Unconventional Portfolio is lower, thus worse.
  • Looking at Sharpe Ratio in of 0.51 in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to SPY (0.96).

Sortino:

'The Sortino ratio improves upon the Sharpe ratio by isolating downside volatility from total volatility by dividing excess return by the downside deviation. The Sortino ratio is a variation of the Sharpe ratio that differentiates harmful volatility from total overall volatility by using the asset's standard deviation of negative asset returns, called downside deviation. The Sortino ratio takes the asset's return and subtracts the risk-free rate, and then divides that amount by the asset's downside deviation. The ratio was named after Frank A. Sortino.'

Applying this definition to our asset in some examples:
  • The excess return divided by the downside deviation over 5 years of Yale U's Unconventional Portfolio is 0.51, which is lower, thus worse compared to the benchmark SPY (1.13) in the same period.
  • Compared with SPY (1.46) in the period of the last 3 years, the downside risk / excess return profile of 0.76 is smaller, thus worse.

Ulcer:

'The Ulcer Index is a technical indicator that measures downside risk, in terms of both the depth and duration of price declines. The index increases in value as the price moves farther away from a recent high and falls as the price rises to new highs. The indicator is usually calculated over a 14-day period, with the Ulcer Index showing the percentage drawdown a trader can expect from the high over that period. The greater the value of the Ulcer Index, the longer it takes for a stock to get back to the former high.'

Using this definition on our asset we see for example:
  • The Downside risk index over 5 years of Yale U's Unconventional Portfolio is 11 , which is higher, thus worse compared to the benchmark SPY (8.48 ) in the same period.
  • Looking at Ulcer Index in of 5.14 in the period of the last 3 years, we see it is relatively smaller, thus better in comparison to SPY (5.3 ).

MaxDD:

'Maximum drawdown is defined as the peak-to-trough decline of an investment during a specific period. It is usually quoted as a percentage of the peak value. The maximum drawdown can be calculated based on absolute returns, in order to identify strategies that suffer less during market downturns, such as low-volatility strategies. However, the maximum drawdown can also be calculated based on returns relative to a benchmark index, for identifying strategies that show steady outperformance over time.'

Applying this definition to our asset in some examples:
  • The maximum DrawDown over 5 years of Yale U's Unconventional Portfolio is -26.2 days, which is lower, thus worse compared to the benchmark SPY (-24.5 days) in the same period.
  • Compared with SPY (-18.8 days) in the period of the last 3 years, the maximum DrawDown of -16.2 days is higher, thus better.

MaxDuration:

'The Drawdown Duration is the length of any peak to peak period, or the time between new equity highs. The Max Drawdown Duration is the worst (the maximum/longest) amount of time an investment has seen between peaks (equity highs). Many assume Max DD Duration is the length of time between new highs during which the Max DD (magnitude) occurred. But that isn’t always the case. The Max DD duration is the longest time between peaks, period. So it could be the time when the program also had its biggest peak to valley loss (and usually is, because the program needs a long time to recover from the largest loss), but it doesn’t have to be'

Using this definition on our asset we see for example:
  • Looking at the maximum time in days below previous high water mark of 677 days in the last 5 years of Yale U's Unconventional Portfolio, we see it is relatively greater, thus worse in comparison to the benchmark SPY (488 days)
  • During the last 3 years, the maximum time in days below previous high water mark is 333 days, which is larger, thus worse than the value of 199 days from the benchmark.

AveDuration:

'The Drawdown Duration is the length of any peak to peak period, or the time between new equity highs. The Avg Drawdown Duration is the average amount of time an investment has seen between peaks (equity highs), or in other terms the average of time under water of all drawdowns. So in contrast to the Maximum duration it does not measure only one drawdown event but calculates the average of all.'

Using this definition on our asset we see for example:
  • Compared with the benchmark SPY (120 days) in the period of the last 5 years, the average days under water of 212 days of Yale U's Unconventional Portfolio is greater, thus worse.
  • During the last 3 years, the average days below previous high is 96 days, which is greater, thus worse than the value of 47 days from the benchmark.

Performance (YTD)

Historical returns have been extended using synthetic data.

Allocations ()

Allocations

Returns (%)

  • Note that yearly returns do not equal the sum of monthly returns due to compounding.
  • Performance results of Yale U's Unconventional Portfolio are hypothetical and do not account for slippage, fees or taxes.
  • Results may be based on backtesting, which has many inherent limitations, some of which are described in our Terms of Use.