Council on Foreign Relations hosts David Swensen discussing how long term investors should navigate low return environments, liquidity risk, and market complacency. Swensen argues that calm markets may be underpricing tail risks, while Yale’s portfolio increasingly emphasizes uncorrelated assets despite years of strong equity performance.
A Conversation with David Swensen
Council on Foreign Relations
Robert Rubin, David Swensen
Video
1 Pages
Key Takeaways
Tail Risk Focus: Swensen called the 1987 crash a “25 standard deviation” event, arguing markets consistently underestimate extreme downside scenarios during low volatility periods.
Liquidity Buffer Importance: Yale rebuilt uncorrelated assets above 30%, targeting 32.5%, after liquidity exposure fell near 15% following the 2008 financial crisis.
Lower Return Expectations: After decades using an 8.25% nominal assumption, Swensen pushed Yale toward a 5% nominal return outlook amid structurally lower future returns.
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