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Unconventional Success: A Fundamental Approach to Personal Investment Hardcover – August 9, 2005


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Unconventional Success: A Fundamental Approach to Personal Investment + Pioneering Portfolio Management: An Unconventional Approach to Institutional Investment, Fully Revised and Updated + The Intelligent Asset Allocator: How to Build Your Portfolio to Maximize Returns and Minimize Risk
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Product Details

  • Hardcover: 403 pages
  • Publisher: Free Press; 1 edition (August 9, 2005)
  • Language: English
  • ISBN-10: 0743228383
  • ISBN-13: 978-0743228381
  • Product Dimensions: 6.1 x 1.3 x 9.2 inches
  • Shipping Weight: 1.1 pounds (View shipping rates and policies)
  • Average Customer Review: 4.1 out of 5 stars  See all reviews (119 customer reviews)
  • Amazon Best Sellers Rank: #17,090 in Books (See Top 100 in Books)

Editorial Reviews

From Booklist

Swensen, CIO of Yale University and the author of Pioneering Portfolio Management, reveals why the mutual fund industry as a whole does a disservice to the individual investor. Soft money, 12b-1 fees, overtrading, market timing, and other management practices lower performance and virtually guarantee that most mutual fund returns will fall short of their benchmark, such as the S&P 500. Furthermore, for-profit mutual fund companies have a fiduciary obligation to their stockholders, not to their investors, and this relationship "inevitably resolves in favor of the bottom line." Swensen is also highly critical of the Morningstar rating system, which only causes investors to chase hot performing funds and managers. He advises considering alternatives to the for-profit mutual fund industry, including Exchange Traded Funds and not-for-profit financial institutions such as Vanguard and TIAA-CREF. He highly recommends that as an individual, you should play a more active role in your financial future. This includes periodic portfolio evaluation and rebalancing, to ensure that your asset allocation remains diversified and suits your investment time line. David Siegfried
Copyright © American Library Association. All rights reserved

Review

"Mutual fund managers and marketers are not going to like David Swensen's thoughtful and intelligently opinionated analysis of their 'colossal failure' resulting from the fund industry's 'systemic exploitation of investors.' Coming from the mind and heart of one of America's most successful and integrity-laden money managers, this is a book that will change the way you think about mutual funds. It's high time for you to follow the elegantly simple advice he presents in this wonderful book."
-- John C. Bogle, founder and former CEO, The Vanguard Group

"Swensen is the best. Always a pioneer, his new book presents an approach to investing that is both brilliant and practical."
-- Barton Biggs, former Chief Global Strategist, Morgan Stanley

"A legendary institutional investor reveals the conflicts of interest that induce most financial services companies to provide inadequate products for the individual investor. Swensen's wise solution: Low cost, tax efficient, market-mimicking funds available either through Exchange Traded Funds (ETFs) or from not-for-profit mutual fund companies. Unconventional Success does for the individual investor what Swensen's Pioneering Portfolio Management did for the institutional investor."
-- Burton G. Malkiel, author of A Random Walk Down Wall Street

"David Swensen is one of today's best endowment managers, if not the best. Unconventional Success is a perfect summary of what is wrong with a very important industry. This book should lead the reader to better investment decisions."
-- Michael F. Price, Managing Partner, MFP Investors

"Unfortunately, at the bottom of our industry -- money management -- there is a rather thick layer of muck, and Swensen's Unconventional Success rakes through this muck in spectacular fashion and great detail. It is the truth, the whole truth, and the very ugly truth. If you want to avoid the snares that lurk in money management, and save yourself lots of money, you must read it."
-- Jeremy Grantham, Chairman of GMO

More About the Author

David F. Swensen is the chief investment officer of Yale University and the bestselling author of Pioneering Portfolio Management. He serves on the boards of TIAA, The Brookings Institution, Carnegie Institution, and Hopkins School. At Yale, where he produced an unparalleled two-decade investment record of 16.1 percent-per-annum returns, he teaches economics classes at Yale College and finance classes at Yale¹s School of Management. Mr. Swensen lives in New Haven, Connecticut.

Customer Reviews

This book is a very difficult read.
SanjeevP
Overall, however, I think anyone with a 401k or a few thousand dollars to invest will benefit from a thorough reading of this book.
S. Vaccaro
Mr. Swensen discusses the mutual fund industry from an insiders viewpoint.
John Matlock

Most Helpful Customer Reviews

510 of 514 people found the following review helpful By S. Vaccaro on September 5, 2005
Format: Hardcover
I am a graduate of the Yale School of Management (with a focus in finance) and have been a fan of Swensen's for a long time. Unconventional Success is, in my view, a must read for anyone who has to manage their own retirement assets (which is most people today).

Swensen compellingly makes the case that (a) the vast majority of passively managed funds outperform actively managed funds (after fees), (b) the vast majority of the mutual fund industry allows profit motives to trump their fiduciary duty to investors, and (c) an individual investor's financial assets are best managed by non-profit organizations - i.e., Vanguard or TIAA-CREF.

Swensen lays out six "core" asset classes that should form the basis of an individual investor's portfolio, each of which should comprise between 5% and 30% of the portfolio. Below is the "generic" target portfolio outlined in the book:

1. Domestic Equity (30%)

2. Foreign Developed Market Equity (15%)

3. Emerging Market Equity (5%)

4. Real Estate (20%)

5. U.S. Treasury Bonds (15%)

6. U.S. Treasury Inflation-Protected Securities (15%)

Swensen also discusses "non-core" asset classes and why each should not be a part of an individual investor's portfolio. These "non-core" asset classes include:

1. Domestic Corporate Bonds, 2. High Yield (Junk) Bonds, 3. Tax Exempt (Municipal) Bonds, 4. Asset-backed securities, 5. Foreign Bonds, 6. Hedge Funds, 7. Leveraged Buyouts, and 8. Venture Capital. We spent so much time in business school glorifying these assets that I found the rationale for why they have no place in an individual's portfolio quite useful.
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81 of 83 people found the following review helpful By Dale C. Maley VINE VOICE on April 23, 2006
Format: Hardcover
I was fairly impressed with this book. I would give it an A, but the style of writing was painful to read, so I give it a B.

I recently saw several articles about Harvard's endowment manager leaving Harvard to set up his own firm. I was amazed to see how diversified the Harvard fund was in that it included not just stocks and bonds, but many other asset classes:

U.S. equities 15%
Commodities 13
Private Equity 13
Hedge Funds 12
U.S. Bonds 11
Foreign Equities 10
Real Estate 10
Inflation-Indexed Bonds 6
Emerging Markets 5
High-Yield 5
Foreign Bonds 5
Borrowed Money -5

This info came from 12/27/04 Business Week article. The same article said Harvard's endowment fund grew from $4.7B in 1990 to $22.6B in 2005. This sounds impressive until you calculate the compounded return, which is 11.04%. Simply investing in an S&P 500 index fund over the same time period would have given roughly a 10.91% compounded rate of return.

Swensen seems to have followed a similar very diversified approach at Yale.

I really enjoyed the explanation of why certain asset classes should not be included in investor's portfolios.....specifically foreign bonds.

Since I am an avid Index Fund investor, Swensen was preaching to the choir with regards to blasting the "for profit" mutual fund companies. Being a Vanguard investor, I was disappointed to see Vanguard take one hit for following one type of unsavory practice. Compared to the "for profit" mutual fund companies, Vanguard is a shining angel.

The successes of Harvard's and Yale's endowment fund investments are spreading the gospel of the advantages of asset allocation.
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90 of 95 people found the following review helpful By B. Humphrey on October 2, 2005
Format: Hardcover Verified Purchase
Written by one of the brightest and most successful money managers, the book has straightforward advice on what assets should makeup a portfolio and what assets (and providers) should be avoided. He definitely picks a few bones with the mutual fund industry which of course has been done before in such books as "The Intelligent Asset Allocator" by Bernstein and "A Random Walk Down Wall Street", corporate governance etc. As mentioned elsewhere he also goes into detail about the importance of rebalancing your portfolio.

Pros:

1. Gives advice on companies which can be trusted and provide products and investments where the investors objectives are aligned with the products (stocks, etfs, government bonds etc).

2. Lists specific indecies and providers he favors over others. There are tons of etfs out there so it's helpful to see a list he likes. He goes into detail about why some are more efficient then others.

3. Straightforward writing and sections. Easy to skip things you may already know (e.g. most mutual funds should be avoided).

4. Written by someone whe has done this with great success himself.

Cons:

1. Spends long sections in the book going into perhaps too much detail on specific examples of assets to avoid.

2. Regarding #1, I would have preferred more detail on specific allocations and products he likes and how we should use them best.

3. His own asset allocation at Yale includes a substantially different asset mix but he never gives detail on why Yale buys these things (e.g. Hard Assets) but individuals can or should not.

4. No advice on any sample portfolio.

5. Some mention of DFA would be nice.

In the end, I still prefer William Bernsteins "The Intelligent Asset Allocator" but this book is right up there and is one of the best I have read in years (and I have read most all of them).
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