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Wise Money: Using the Endowment Investment Approach to Minimize Volatility and Increase Control by Daniel Wildermuth

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3The Endowment Model

HOW DID THE ENDOWMENT MODEL BEGIN? OFTENTIMES, ACCEPTED wisdom slowly materializes out of the fog. There’s no real beginning, it just is. While MPT accelerated investors’ grasp of investment concepts with stocks and bonds, the employment of these asset classes in investment portfolios had been around for centuries. Yet surprisingly, the endowment model can trace its history to a specific beginning point.

This more progressive and sophisticated investment approach has been emerging since David Swensen became the chief investment officer for Yale University in 1985. After taking over the Yale endowment, Swensen developed an investment approach for the university predictably named the “Yale model.” Over time, this strategy has ...

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