February 9(th)
I have seen the offices of many large investment institutions, and David Svencen's office is the simplest.
There are elevators at 55-5 Whitney Street in New Haven, and this is the painting style at the front desk, which seems to come from IKEA. Svencen's personal office is also IKEA style.
Svencen is a real estate fund manager of Yale University, a living legend. Yale's property fund management exceeds $26 billion, second only to Harvard, and Svencen's influence in the industry is unparalleled.
University donations are neither special nor special. Not particularly, the management of school property funds is also funds, but funds must be rewarded; What is special is that the university is sustainable, so the school property fund is sustainable, and it has a long investment period.
How long is it?
Yale University was founded 70 years longer than the founding of the United States. The goal of the school property fund operation is to support the university to continue to move towards an endless future.
The school property fund mainly comes from donations and plays an increasingly important role in the source of funds for first-class universities. Nearly half of Yale's annual budget and more than one billion dollars come from the school property fund. Many people think that Svencen has made the greatest contribution to Yale University.
Take the Yale World Scholars Program as an example. About half of the budget comes from school grants and half from donations. Last year, it received a donation of $6.5438+0.5 million from American insurance giant Greenberg, and the existing donation funds ensured the sustainability of the project. The money will go to the school property fund. Even if there is a problem with the school funding, the income from the school property fund investment will be enough to ensure that the project will not be affected.
This is true of all the titled lecture chairs you see.
Svencen is a real academic investor. He studied at Yale, studied under Nobel Prize winner Tobin, and spent most of his career in Yale School Property Fund, bringing the quiet, ancient and conservative school property fund industry into a new era.
In his view, the school property fund should make full use of its long investment cycle, go beyond the traditional combination of stocks and bonds, and invest in longer-term illiquid assets, such as private equity (PE), venture capital and other alternative investment tools, in order to obtain the risk return brought by illiquidity. This has become common sense today, but it was shocking more than 20 years ago.
This logic has a solid theoretical foundation. In the past 20 years, it has brought double-digit compound growth rate to Yale School Property Fund, which has significantly defeated the S&P index and brought Yale logic to the whole industry. Today, among the top ten school property fund managers in the United States, seven are from Svencen.
Sustainable development is only one of the two major goals of school property management, and the other is the urgent need to support teaching and research. There is tension between the two: if the rate of return is too stable, it will not last forever, because it is difficult to outperform inflation, especially education inflation; Too long-term focus may lead to immediate cash flow pressure. The two must be balanced.
The financial crisis in 2008 was a stress test for school property funds. The liquidity of the whole financial system has been tightened, and those funds that invest in illiquid assets are under heavy pressure, many of which have to be liquidated. Yale's property fund also suffered huge losses, with the loss rate exceeding 20%. So is Harvard, the largest school property fund.
The damage to the investment of the school property fund may directly affect the school budget, and Harvard has to postpone the plan to build a science center. Yale is good. Svencen told me that the school property fund still raised enough funds to ensure the normal operation of Yale.
As the property funds of the two schools, Yale School Property Fund is completely different from Harvard School Property Fund. Harvard school property fund is like a hedge fund company located in a university, which is completely market-oriented, and its salary refers to the market standard of hedge funds. If the years are good, managers can earn hundreds of millions of yuan, which will naturally cause a lot of criticism in universities: does universities respect teaching, scientific research and educating people? Still want to make money first? Last year, the Harvard School Property Fund performed poorly and the manager had to resign. I just saw the title of the investment page of the Wall Street Journal. The Harvard School Property Fund is going to lay off half its employees, basically abandon the existing model and hand over the money to external fund managers. In other words, prepare to do as Svencen did.
What Svencen did at Yale was completely different. Yale's property fund manages more than $26 billion, but his own income is only a few million dollars a year, which is much higher than that of professors, but it is completely out of proportion to the market salary. Modesty and self-restraint, he let the school property fund live in harmony with Yale University.
Yale's school property fund is diversified, with 50% invested in American debt assets, 65,438+05% invested in international debt assets, 65,438+05% invested in M&A funds, 65,438+05% invested in venture capital funds and the rest. At present, there are about 30 employees, all of whom graduated from Yale. They don't take charge of money directly, but choose suitable external funds and give them management.
Yale's logic goes like this:
The market is not efficient, but it is extremely difficult to profit from its inefficiency. Svencen and his colleagues spend almost all their time looking for active investment managers who can get alpha (excess return).
How to find and manage these people? Svencen thinks:
First, qualitative standards are far more important than quantitative standards. If we don't analyze the reasons for the historical performance of the fund, where the motivation comes from, how to motivate it, and what process, the historical performance data is of little significance.
Second, the strategy of active investment manager should have reliable fundamental logic and fully understand all aspects of its strategy. It cannot be said that because this is a quantitative strategy, the technical black box cannot be transparent to us.
Third, pay attention to the bottom-up strategy; Not too inclined to macro strategy.
Fourth, these active investment managers are often highly focused on investment because they know the investment target very well. Yale students accept this practice, provided that they also have a good understanding of these investment goals.
Fifth, the Yale School Property Fund should meet with all external management teams, not just the person in charge.
Sixth, the goal of Yale School Property Fund is to maintain decades-long relationships with external managers, not short-term relationships. If the fund manager's salary has little to do with the fund performance, but has a great relationship with his own company's share price, this relationship is unstable. Svencen hopes that these institutions will have a long-term talent structure and incentive mechanism. They will invest together with Yale, and whatever they invest, they will invest together.
Seventh, Yale focuses on the real long-term investment cycle, regardless of quarterly or annual performance. Most funds don't have this view of time, which gives Yale an opportunity and is also part of the inefficient market. Almost all the external managers selected by Svencen agree with this view. Their salary is not based on annual assessment, but on long-term performance, such as five years.
Eighth, the Yale School Property Fund is often the first investor in the newly established fund, thus jointly creating the structure and culture. These newly established funds are also the most hungry and passionate, although there is no historical performance record. Interestingly, the best external managers of Yale University's property funds often fall into this category, such as Zhang Lei's Gaoling Capital. Zhang Lei was an analyst at Yale University Property Fund. When Gaolin Capital was established, there was no investment record. Svencen made a decision to invest100000 USD. Today, Gao Yan Capital has managed more than $20 billion in just over ten years.
Ninth, there is no minimum investment.
Tenth, a high degree of transparency is needed. If the external fund manager is not prepared to provide information about all the investment objects, Svencen will not invest; If external fund managers deviate from the original investment style, they must communicate; However, if its performance is lower than the benchmark, this is not necessarily a bad thing in itself. Communication is definitely important, but after communication, you may increase your investment.
Facts have proved that the Yale model has withstood the stress test of the financial crisis, and now the Yale School Property Fund has completely recovered its losses. The average compound rate of return in the past decade beat the Standard & Poor's 500 index and ranked first among large school property funds; What about the past year? This is also the case. As a giant, sprint comes first, and long-distance running comes first.
I asked Svencen, what lessons have you learned from the shock?
"I have a deeper understanding of liquidity." Svencen said.