garlandwhizzer wrote: ↑Mon Sep 28, 2020 3:34 pm
Swensen recommends 15% TIPS and 20% REITs in his reference portfolio, but he also notes the importance of creating a portfolio that aligns with your goals and philosophy:
Correct me if I'm wrong about this but I believe that Swensen has changed his portfolio recommendations in recent years, lowering REIT exposure. After very good US REIT performance in the 2000s, REITS have substantially underperformed TSM for about 7 years. All pension fund/endowment fund money managers, even ones with outstanding long term records like Swensen, are on performance leashes. When they underperform for a significant time period their jobs can be in peril so they cannot afford to wait too long for promised outperformance to show up. Swensen due to his success is on a long leash not a short one, but even he cannot ignore recent market setbacks. If indeed he did adjusted his REIT exposure it may be for this reason.
Ah yes, it looks like he did change the REIT recommendation from 20% to 15% (see viewtopic.php?t=91895
), though in the Unconventional Success book he didn't present the 20% number as etched in stone:
Any number of portfolio allocations satisfy the mathematical and functional requirements of diversification and equity orientation. Table 3.1 contains an asset-class combination that serves as a reference portfolio for investors to consider.
Ironically, someone in the linked thread pointed out that after Swensen lowered his REIT recommendation, REITs actually overperformed for a while.
But I think the larger point that is most relevant to the current thread is that Swensen points out that holding some REITs within a portfolio can help provide an inflation hedge, if
the investor commits to the investment as part of difersified portfolio and
sticks with it. Personally I've found that to be easier said than done (as we see in so many discussions here on FOMO associated with owning small cap value and international in recent years).