Endowment

All Seasons Portfolio by Ray Dalio

All Seasons Portfolio

The All Seasons Portfolio by Ray Dalio is a simplified version of his famous All Weather fund that can be easily implemented by everyday investors.

the All Seasons portfolio by Ray Dalio

Asset Allocation

%Asset Class
30%Large Cap Blend Stocks
40%Long Term Bonds
15%Intermediate Term Bonds
7.5%Commodities
7.5%Gold
Asset Notes

The Portfolio Charts tools use round numbers, so I reallocated the portfolio slightly while preserving the original design intent as closely as possible.

Performance

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Author

Ray Dalio

Ray Dalio is the founder and chief investment officer of the world’s largest hedge fund, Bridgewater Associates. You can read about his thoughts on the All Seasons Portfolio in the Tony Robbins book MONEY Master the Game.

Overview

The All Seasons Portfolio is built on the philosophical foundation of Dalio’s All Weather Fund, a popular hedge fund among institutional investors. According the All Weather Story, the original goal of the fund was to answer a deceptively simple question:

What kind of investment portfolio would you hold that would perform well across all environments, be it a devaluation or something completely different?

Dalio and his Bridgewater team concluded that while individual assets are unpredictable, they react in understandable ways based on cash flows in the prevailing economic environment. They arranged those environments into four quadrants:

All Weather Fund four quadrants, the foundation for the All Seasons Portoflio

By filling each quadrant with assets that respond to each economic condition and balancing the asset weights to achieve risk parity for each situation, Dalio designed a portfolio capable of succeeding no matter what happens in the markets.

While the institutional All Weather fund includes a lot of active management and a number of investments not available to everyday investors, the All Seasons portfolio is a simplified version that he recommends to individuals looking to build an autopilot portfolio using the same All Weather philosophy.

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Investing for All Seasons

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Alternatives

Portfolios with a similar structure or design intent

Permanent Portfolio — A similar investing philosophy built around economic risk parity

Larry Portfolio — Similar portfolio structure to balance volatility risk between assets

Swensen Portfolio — Another portfolio that uses institutional investing concepts

The Ivy Portfolio by Mebane Faber

Ivy Portfolio

The Ivy Portfolio by Meb Faber mimics the investing strategies of the Harvard and Yale endowments in a form that an individual investor can easily manage.

The Ivy Portfolio by Mebane Faber

Asset Allocation

%Asset Class
20%Large Cap Blend Stocks
20%International Large Cap Blend Stocks
20%Intermediate Term Bonds
20%Commodities
20%REITs
Other Versions

The charts show the historical results based on a fixed asset allocation. While I’m not able to model it, Faber also discusses the benefits of overlaying momentum strategies on the portfolio. So it’s worth reading his work to understand other approaches to the same idea.

Performance

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Author

Meb Faber

Meb Faber is the co-founder and Chief Investment Officer of Cambria Investment Management. He talks about the Ivy Portfolio the book The Ivy Portfolio by Faber and Eric Richardson.

Overview

The Ivy Portfolio originates from the idea of studying the investing styles of the largest and most successful college endowments. While not every institutional investment is available to individuals like you and me, many of the core principles can be closely mirrored relatively easily with just a few core index funds.

The most notable feature of the Ivy Portfolio is a relatively large allocation to real assets, reflective of the investing choices of many endowments that diverge a bit from conventional wisdom. By equally weighting very different types of assets, it’s a good example of a more tactical investing mindset that seeks returns under every stone rather than holding tight to old allocation paradigms.

In professional investing circles, Meb Faber is perhaps best known for his famous work on Tactical Asset Allocation using momentum trading strategies. So it’s only natural that in the book he also discusses using momentum to trade in and out of Ivy assets depending on market trends. The charts here only track the passive buy and hold version of the Ivy Portfolio just like all of the other options, but if you’re interested in Faber’s full ideas I encourage you to read his work.

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Alternatives

Portfolios with a similar structure or design intent

Swensen Portfolio — Another interpretation of endowment investing ideas

7Twelve Portfolio — Wide diversification with a shared focus on real assets

Golden Butterfly — Another portfolio with five equal parts of unique assets

The Swensen Portfolio by David Swensen

Swensen Portfolio

The Swensen Portfolio by David Swensen packages the investing ideas used by the Yale Endowment in a format accessible to normal investors.

The Swensen Portfolio by David Swensen

Asset Allocation

%Asset Class
30%Large Cap Blend Stocks
15%International Large Cap Blend Stocks
5%Emerging Market Stocks
30%Intermediate Term Bonds¹
20%REITs
Asset Notes

1. Swensen specifically calls for 15% TIPS as part of the bond portion of the portfolio.  I don’t have good data for that asset, so I added it to the overall IT bond allocation.  Be sure to read Swensen’s explanation for why he chooses the assets he does.

Other Versions

The allocation here is the one discussed in Unconventional Success. In later interviews, Swensen recommended a small tweak where he shifted an additional 5% of the REIT allocation to emerging markets.

Performance

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Swensen Portfolio
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Author

David Swensen

David Swensen was the famed Chief Investment Officer at Yale who led their endowment for more than three decades. He talks about the Swensen Portfolio in his book Unconventional Success.

Overview

David Swensen is most famous for his role as Chief Investment Officer of the Yale Endowment, one of the largest endowments in the world famous for its sustained superior returns. But since the Yale Endowment manages billions of dollars and invests in all kinds of exotic assets only available to large institutions, its methods are not that attainable by your average retail investor. Swensen sought to correct that shortcoming, however, and the Swensen Portfolio is his personal investing recommendation to people like you and me.

Swensen’s philosophy goes far beyond simple asset allocation. True to his principles that are sadly all too rare among big-time investors, his book Unconventional Success makes a compelling case for individuals to take control of their investments from the financial industry that does not have their best interests in mind.

One of the notable features of the Swensen Portfolio is a sizable allocation to REITs that reflect a common endowment strategy not always embraced by mainstream asset allocators. The balance between stocks, bonds, and real assets is an important part of what makes it tick, and the Swensen Portfolio serves as an educational window into the inner workings of some of the most successful funds that are responsible not for fleeting returns but for decades of sustainable growth and income. It may especially appeal to investors like early retirees who share similar goals.

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Things We Can All Learn From The Yale vs. Buffett Debate

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Alternatives

Portfolios with a similar structure or design intent

Ivy Portfolio — Another portfolio directly inspired by college endowments

Pinwheel Portfolio — Similar structure with a focus on real assets

7Twelve Portfolio — Same percentage of stocks and domestic bonds with fewer real assets