Is Swensen's message "Do as I say, Not as I do?" Swensen put Yale's money in the hands of the best money managers available. Then he writes a book on how YOU can't select a good money manager, so you should be stuck with the volatility and middling performance of Index funds. These funds generally rank in the top 72%-78% of all funds...in other words they are solid C-average students. Guess what? There are dozens of money managers out there that regularly beat those indexes, have been doing it for decades, do so at low cost, and with lower volatility. American Funds, of course, is the best known brand, but look at any of the fund companies with over 30-40 years in business and you will more than likely find good core investments.
I generally agree with you -- Swensen recommends a 30% bond allocation in his book, yet Yale's Endowment's target is only 7.5% because of low expected returns. So I'm puzzled by the very large discrepancy, to your question.
I haven't read the book but did hear his interview recently on NPR. He does use money managers for Yale's funds. He has some very good ones. But he said that there are not good resources for individuals to do the intense type of money managing that is required to get the high rate of returns the Yale endowment gets. So individuals need to get someone to manage for them - so invest in mutual funds. But the actively managed funds by for-profit companies have a poor track record of beating the low fee, passive index following funds. So for the typical person saving for retirement investing along his "Do as I say" lines makes sense. This is why his advice looks hypocritical.
I did not read the book, but I also heard an NPR interview (to listen, go to www.onpointradio.org and search for "Swensen"). However, one reason for the bond discrepancy may be that an individual investor has a time horizon to retirement of 50 years at most, whereas Yale, as an institution, has an unlimited term and large reserves. So, Yale can weather a bad stock market, while an individual could be wiped out. The larger bond allocation provides the additional diversity and stability required for most folks.
Another possible reason is that Swensen's elite money managers may be better able to predict and avert disaster in a down market, so, again, they don't need as large a bond allocation.
In short, the point is that this portfolio is for individuals (not institutions) who have busy lives (and can't devote their time to managing retirement investments).
I've read the book and went to Yale SOM. Dave Swensen has a rare talent for picking money managers. He also has billions to invest, and so it's a lot easier for him to find and to invest with the best. For us individual investors the picking are a lot slimmer, with lower returns and higher fees.
I found this book excellent, and promptly used it to advice a bunch of others.