According to former colleagues and friends, few institutional investors have been as influential as David Swensen.
The longtime Yale University investment chief died at age 67 on Wednesday after a long battle with cancer, the school’s president announced on Thursday. Those who knew him say he leaves behind a legacy of pioneering investment management and enduring mentorship that will live on for years to come.
“It is a day of grief but also a day of gratitude,” Anne Martin, chief investment officer at Wesleyan University and a former Yale Investments Office director, said via email Thursday. “David had such a huge impact on the world and that’s something we should all be grateful for.”
Swensen “Transformed” Endowment Management
Swensen’s life at Yale began with a Ph.D. degree in economics, which he earned in 1980. He left the university for jobs at Salomon Brothers and Lehman Brothers before returning to the New Haven, Connecticut, school in 1985.
He had been hired to manage Yale’s endowment, a position he held until his death. During his time at the investment office’s helm, Swensen grew the portfolio to $31.2 billion as of June 30, 2020, returning an unrivaled 12.4 percent on average for the past 30 years, according to Yale Investments Office’s website.
Swensen achieved these returns by developing what is now known as the “Yale Model,” which involves funneling a large portion of capital into alternative assets. According to a column written by Charles Ellis, Yale’s former investment committee chair, the model requires an “unusually heavy commitment to equity investments — with bonds relegated to providing only enough liquidity to meet the inherently unpredictable variations in cash requirements of a major university that has many independent inflows and outflows.”
The investment strategy was industry-changing, endowment heads said.
“David did not just lead the endowment industry, he transformed it,” said Seth Alexander, president of MIT Investment Management Company and former Yale Investments Office director. “He re-made the way all of us invest.”
Days before he died, Swensen led a discussion on the new “Yale Investments Office: November 2020” case study for the school’s senior economics seminar, Investment Analysis, according to Dean Takahashi, Swensen’s long-time second in command.
“He was incredibly selfless and generous in his dedication to Yale and its teaching mission,” Takahashi said. “Dave was a legendary pioneering investor and built incredible value for Yale and many other endowments and charities, but to me what was extraordinary and special was how much he loved and cared for his wife Meghan, family, friends, and Yale, and how he was able to lead and inspire all those around him.”
Although Swensen’s investment model was ground-breaking, former colleagues and friends, including Takahashi, said they will remember his devotion to Yale and his mentorship of students and employees even more.
“David will of course be remembered for his contributions to institutional investing, which served as a guide for so many,” said Kim Sargent, chief investment officer at the David and Lucile Packard Foundation and former senior analyst at Yale. “What people may not know about David is what a dedicated teacher and mentor he was to young people.”
In addition to running the university’s investment office, Swensen taught classes at the school. He hired Yale students as interns and entry-level employees and advised the school’s administrators, Institutional Investor previously reported.
Takahashi met Swensen 45 years ago when the famous investor, then a graduate student, was serving as a freshman counselor at Berkley College. Takahashi recalled that as college students, they joked that Swensen was the “biggest, most enthusiastic freshman even though he was an accomplished graduate student in economics.”
“Since then, he has been my mentor, boss, teammate, co-coach, co-teacher, colleague, partner, supporter, best man for my wife Wendy and me, and best friend,” Takahashi said via email.
Takahashi would go on to spend 33 years working under Swensen at the Yale Investments Office, ultimately serving as senior director and effective deputy before stepping down from the role in 2019.
According to Bowdoin College’s outgoing CIO, Paula Volent, Swensen was great at talent scouting.
“He had an uncanny ability to identify investment talent and backed many investors who would later become household names in the industry,” said Volent, who previously worked as a senior associate at Yale’s endowment office. She added that Swensen took “great pride” in watching his former employees take the Yale model to other institutions, including Bowdoin.
According to Takahashi, of the top 15 endowments ranked on their 10-year performance numbers, six are led by Yale Investments Office alumni.
In an interview with II at his office in the spring of 2018, Swensen said that he stayed in touch with students up to 30 years after they had been in the classroom. “I just love teaching,” he said. “Those connections are really important and really valuable to me.”
Those former students remember Swensen fondly.
“As I look back on my career, there is no teacher who had a greater impact on my career and life than David,” said David Trujillo, partner at private equity firm TPG. Trujillo recalled that when he took Swensen’s course as a senior in college, Swensen said he’d be “great at private equity.”
“At the time, I had never heard the term,” Trujillo said. “He introduced me to my first job and now I’ve been in private equity for 24 years. He did that for dozens of students over the years, which is a really remarkable thing.”
Ted Seides, author of Capital Allocators and former senior associate at the Yale endowment, remembered Swensen similarly. “David was my first and greatest mentor and was like another father to me,” he said via email. “I clung to every word he said, about investing and life.”
Princeton University Investment Company president Andrew Golden, another former senior associate, likewise holds Swensen’s advice close.
“Every day I worked for him, every day since, and I suspect every day in the future, I had at least one debate with him, internal in my mind: “What would Dave say about this investment opportunity, this organizational choice, this potential hire, etc.?’” he told II.
“I remember the advice he shared 28 years ago when I left the YIO for another job: ‘You have to focus on building a team. This job is too big for one person,’” Golden added.
University of Pennsylvania CIO Peter Ammon, another Yale endowment alum, said he “came away from every conversation with David feeling like I had learned something, whether about investing in particular or about life more generally.”
“He taught us to think critically, to remember first principles, to never forget that investing is about people, and to never be afraid to do what is right,” Ammon added.
For Wesleyan CIO Martin, Swensen was a person who changed her life’s “very trajectory.” For Sargent, he was a “dedicated teacher and mentor.” Alexander agreed: “I knew nothing about the endowment industry, but I knew I wanted to go work for him.”
“His Most Lasting Legacy”
For these investors, Swensen’s commitment to Yale and its mission remains inspiring. Trujillo said that Swensen cared “so deeply” and equally about Yale, his students, and his returns.
“On the one hand, he was intensely competitive — he always tracked his returns relative to other endowments — and he was an incredible fighter, having fought cancer for so many years,” Trujillo said. “But David was just as equally caring in terms of what he did for the institution, and what he gave to his students.”
In the 2020 column Ellis wrote for II, the former investment committee chair wrote that Swensen was committed to serving the institution he loved. “He goes farther, teaching a challenging and popular course to undergraduates and participating actively in university events and undergraduate activities,” Ellis wrote.
This included leading beer and wine tastings for the school’s students, a tradition that started when he was a graduate student. He kept the menus as souvenirs, and when he spoke with II in 2018, one was hanging on his wall.
During that interview, Swensen told II that he loved being a part of the Yale community. He recalled that when one former Yale student asked why he wasn’t working on Wall Street — where he’d likely be more financially successful — he responded: “‘Well, if I were to be worth a billion dollars, I’d have to work for a Wall Street firm, and they wouldn’t have a football team.’”
Cheering for the football team, Swensen added, being “shorthand for loving the community and obviously the students and the faculty and colleagues.”
Takahashi said that it was “so fitting” that the presentation Swensen gave to students in the week leading up to his death opened with him reminiscing about the 2019 Yale-Harvard football game. Swensen conducted the coin toss for “The Game,” as Takahashi called it, something Swensen said he was “honored and lucky” to do.
“Of course, it was the teams and fans that were privileged by David’s participation and all he has done for Yale and endowment management,” Takahashi added.
“Despite his ongoing battles with cancer, Dave and Meghan hosted a broad collection of friends and doggedly cheered on the team through the protests, the double overtime, the thinning crowds, and the oncoming darkness,” Takahashi said. “Dave was overcome with tears of joy when Yale finally won the greatest of all of The Games.”
Near the end of that 2018 interview, II asked Swensen what he wanted his legacy to be. He said: “Just that I helped provide the resources to make a great institution even better.”
Sargent believes that legacy will extend beyond Yale itself: “As those he taught now go out and pay his gifts forward, perhaps this will become his most lasting legacy.”
—Amy Whyte contributed to this reporting.