The Ivy Portfolio: How to Invest Like the Top Endowments and Avoid Bear Markets

Praise for THE IVY PORTFOLIO

"We all know that the most impressive investment returns are from endowment funds and in particular, Yale and Harvard. Faber and Richardson take us inside these two funds and show us how to replicate that model for our portfolios. The Ivy Portfolio is an easy–to–read and –understand book that will make the process of asset allocation and investment easier for readers. And in light of the recent market turmoil, its lessons are even more important."
John Mauldin, author of the bestselling Bull′s Eye Investing and the weekly newsletter Thoughts from the Frontline

"Meb Faber makes a most compelling case for quantitative active asset allocation. ?Investors of all levels of sophistication will benefit handsomely from the insights and analyses presented in The Ivy Portfolio."
Rob Arnott, Chairman, and Jason Hsu, Chief Investment Officer, Research Affiliates; coauthors of The Fundamental Index: A Better Way to Invest

"Analysis of institutional holdings (13F analysis) is one of the most useful yet underused tools in an investor′s research arsenal. Along with taking readers into the arcane world of endowment investing, The Ivy Portfolio provides actionable advice on how to trade alongside the top investment professionals of our time."
Justin Walters, cofounder, Bespoke Investment Group LLC

A do–it–yourself guide to investing like the renowned Harvard and Yale endowments.

The Ivy Portfolio shows step by step how to track and mimic the investment strategies of the highly successful Harvard and Yale endowments. Using the endowment Policy Portfolios as a guide, the authors illustrate how an investor can develop a strategic asset allocation using an ETF–based investment approach.

The Ivy Portfolio also reveals a novel method for investors to reduce their risk through a tactical asset allocation strategy to protect them from bear markets. The book will also showcase a method to follow the smart money and piggyback the top hedge funds and their stock–picking abilities. With readable, straightforward advice, The Ivy Portfolio will show investors exactly how this can be accomplished and allow them to achieve an unparalleled level of investment success in the process.

With all of the uncertainty in the markets today, The Ivy Portfolio helps the reader answer the most often asked question in investing today "What do I do?"

Foreword.

Preface.

Acknowledgments.

Part One. Constructing Your Ivy Portfolio.

Chapter 1. The Super Endowments.

Endowments are Different.

Size Matters

and So Does Performance.

Active Management Over Passive.

Summary.

Chapter 2. The Yale Endowment.

History of the Endowment.

David Swensen′s Ascent.

Of Alphas and Betas.

Outlining the Yale Process.

Domestic Equity.

Foreign Equity.

Fixed–Income.

Alternatives.

Summary.

Chapter 3. The Harvard Endowment.

History of the Endowment.

The Owner′s Mentality.

Harvard′s Swensen.

More Money, More Problems.

How Harvard Does It.

Summary.

Chapter 4. Building Your Own Ivy League Portfolio.

Do As I Do Shadowing the Super Endowments

Risk–Adjusted Returns.

Do As I Say.

Inflation is the Enemy.

Creating an All–Weather Policy Portfolio through Indexing.

Implementing Your Portfolio.

Rebalancing Your Portfolio.

Summary.

Part Two. Alternatives.

Chapter 5. Private Equity.

What Is Private Equity?

Historical Returns and Benchmarking.

How to Invest in Publically Listed Private Equity.

Summary.

Chapter 6. Hedge Funds.

A Brief Introduction to Hedge Funds.

Fund of Funds.

Options to Invest in Hedge Funds.

Individual Hedge Funds.

Fund of Funds.

Practical Considerations.

Summary.

Part Three. Active Management.

Chapter 7. Winning by Not Losing.

Losing Hurts.

The Quantitative System.

Out of Sample Testing and Systematic Tactical Asset Allocation.

Extensions.

A Rotation System.

Practical Considerations and Taxes.

Discipline.

Blood in the Streets (Pop out?).

The Systems vs. the Endowments.

Why it Works.

Summary.

Chapter 8. Following the Smart Money.

Introduction to the 13F.

Combining the Top Fund Managers to Create Your Own Fund of Funds.

Summary.

Chapter 9. Develop an Action Plan.

Implementing Your Ivy Portfolio.

Portfolios Mentioned in The Ivy Portfolio.

Appendix A: A Brief Review of Momentum and Trendfollowing.

Appendix B: Additional Charts.

Appendix C: Recommended Reading.

Bibliography.

About the Authors.

Index.

Mebane T. Faber, CAIA, CMT, is the Portfolio Manager at Cambria Investment Management where he manages equity and global tactical asset allocation portfolios. He is a frequent speaker and writer on investment strategies and authors the World Beta blog. Faber is also the cofounder of AlphaClone, an investing research Web site. Faber began his career as a biotechnology equity analyst and a quantitative research analyst. He graduated from the University of Virginia with a double major in engineering science and biology.

Eric W. Richardson, JD, is the founder and CEO of Cambria Investment Management. He also serves as the President of the General Partner of Cambria Investment Fund, LP, a private investment partnership that makes bridge loans and structured equity investments in emerging–growth companies. He began his career as an associate with the law firm Milbank, Tweed, Hadley & McCloy. Mr. Richardson received a BA from the University of Southern California and a JD from the University of Michigan Law School.

"The most useful recent book could be The Ivy Portfolio: How to Invest Like the Top Endowments and Avoid Bear Markets, by money managers Mebane Faber and Eric Richardson, who work at Cambria Investment Management. They analyze how the endowments of Harvard and Yale posted such world–beating performance. Then they offer a simplified model that regular people can adopt." ( BusinessWeek, April 9, 2009)

"Markets left investors almost no place to hide last year, with nearly every asset class heading south. Money manager Mebane Faber of Cambria Investment Management outperformed by a mile, however.... Faber is co–author of the The Ivy Portfolio, which details his approach. Following the investment tenets of the Harvard and Yale endowments (which until last year both had sterling performance) but without using their riskier alternative assets, he demonstrates how to outperform with lower volatility." (Barron′s, April 27, 2009)

"Does The Ivy Portfolio deserve a spot on Dad′s bookshelf? With its graphics, tables and step–by–step guidance, the book is often more straightforward than a college financial aid form." (Wall Street Journal, June 16, 2009)

"We all know that the most impressive investment returns are from endowment funds and in particular, Yale and Harvard. Faber and Richardson take us inside these two funds and show us how to replicate that model for our portfolios. The Ivy Portfolio is an easy–to–read and –understand book that will make the process of asset allocation and investment easier for readers. And in light of the recent market turmoil, its lessons are even more important."
John Mauldin, author of the bestselling Bull′s Eye Investing and the weekly newsletter Thoughts from the Frontline

"Meb Faber makes a most compelling case for quantitative active asset allocation. Investors of all levels of sophistication will benefit handsomely from the insights and analyses presented in The Ivy Portfolio."
Rob Arnott, Chairman, and Jason Hsu, Chief Investment Officer, Research Affiliates; coauthors of The Fundamental Index: A Better Way to Invest