Swensen
The portfolio Yale's endowment manager wrote for individual investors: mostly stocks, spread over US, developed, emerging and real estate, with bonds held only as US Treasuries and TIPS.
Designed by David Swensen, Unconventional Success (2005). The 2005 book. A 2009 Yale Alumni Magazine piece reports 15% REITs and 10% emerging markets.
Before the numbers. A hypothetical backtest, not a forecast: Jun 30, 2000 to Oct 9, 2026 (26.2 years), the window every published portfolio shares. Rebalanced once a year at 10 basis points a trade. The bar is the three-fund at the same stock share, 70%.
Funds younger than the window are extended by older series, each junction validated (how): TIP by VIPSX before 2003-12-05; VEA by VTMGX before 2007-07-26; VGIT by VFITX before 2009-11-23; VNQ by VGSIX before 2004-09-29; VTI by VTSMX before 2001-06-15; VWO by VEIEX before 2005-03-10.
What it holds
| Asset class, and the fund this backtest holds it through | Weight | Fund fee |
|---|---|---|
| US total stock market VTI · Vanguard Total Stock Market |
30% | 0.03% |
| US real estate (REITs) VNQ · Vanguard Real Estate |
20% | 0.13% |
| International developed stocks VEA · Vanguard Developed Markets |
15% | 0.06% |
| TIPS TIP · iShares TIPS Bond |
15% | 0.18% |
| Intermediate Treasuries VGIT · Vanguard Intermediate-Term Treasury |
15% | 0.04% |
| Emerging-market stocks VWO · Vanguard Emerging Markets |
5% | 0.08% |
| Together | 100% | 0.08% |
The funds are the ones this backtest uses for each asset class, not a list to buy: any fund tracking the same asset class holds the same thing.
Its record against the three-fund at 70% stocks
| Statistic | Swensen | Three-fund at 70% stocks |
|---|---|---|
| Value per $10,000 | $64,421 | $55,591 |
| Total return | 544.21% | 455.91% |
| Annual return (CAGR) | 7.35% | 6.75% |
| Standard deviation | 11.12% | 10.97% |
| Max drawdown | -43.95% | -41.72% |
| Worst calendar year | -25.20% | -25.82% |
| Longest time underwater | 756 days | 864 days |
| Ulcer Index | 8.34% | 9.85% |
| Sharpe ratio | 0.53 | 0.48 |
| Sortino ratio | 0.75 | 0.70 |
| Ulcer Performance Index | 0.66 | 0.50 |
The crises
| Deepest decline from a prior peak | Swensen | Three-fund at 70% stocks |
|---|---|---|
| 2000–02 | -16.9% | -30.0% |
| 2008 | -44.0% | -41.7% |
| 2020 | -25.1% | -24.5% |
| 2022 | -23.4% | -23.4% |
2000–02 is measured from June 2000, the window's start, after the March peak; 2008 from October 2007 to June 2009; 2020 from February to April; 2022 through 2023.
Calendar years
The first and last years are partial.
The trade-off
David Swensen built it in Unconventional Success around diversification across six core asset classes, and he kept the bond side to US government bonds, half of them inflation-protected, so that the bonds would hold up when stocks fell. The TIPS are why this list starts in mid-2000: the TIPS fund this backtest uses begins then.
The trade-offs are six funds to rebalance, and 20% in REITs, a large real-estate share by most standards. A 2009 Yale Alumni Magazine piece reported a later version with 15% in REITs and 10% in emerging markets. Over this window its worst decline was -43.9%, against -41.7% for the three-fund at 70% stocks.