Two ways to run money for ever
Two of the best-known long-term investors run their money in opposite ways. Both work for them. Neither is a recipe for you.
Norway: the whole market, cheaply
Norway’s oil fund, one of the largest in the world, follows a simple benchmark: 70% shares and 30% bonds. It owns a small piece of more than 8,500 companies in about 70 countries, and may own some property and wind and solar farms directly. Almost everything it holds can be sold within days.
Rules, not moods
When markets push the share part more than two points away from 70%, the fund is brought back. If shares rise 25% in a year while bonds stand still, shares become about 74.5% of the fund, and the rule sells some to buy bonds. Nobody asks whether it feels like a good moment.
Yale: paid for waiting
Yale’s endowment puts much of its money into things that are hard to sell: buyout funds, young companies, property and forests, and hedge-fund-style strategies. The idea is that an investor who can wait ten years is paid extra by people who cannot.
What it earned, and when it lags
Over the 20 years to June 2024, Yale’s endowment earned 10.3% a year. In the single year to June 2024 it earned 5.7%, behind a plain fund of world shares, and its own investment chief said a large share in private assets can lag when listed markets run.
Where it bends
The man who built Yale’s model, David Swensen, wrote a whole book telling private savers not to copy it. Yale’s results depend on finding the few outside managers worth paying, with a team and access no person has. For individuals he recommended low-cost index funds, which is closer to Norway than to Yale.
Key takeaways
- Norway owns almost the whole listed market, cheaply, and rebalances by rule.
- Yale is paid for waiting, but its edge rests on managers a person cannot reach.
- Yale’s own architect told individuals to use index funds.