Yale’s chief investment officer and resident finance guru David Swensen GRD ’80, along with Greenwich Associates founder Charles Ellis ’59, emphasized the importance of integrity in a field that can often be dominated by “individual greed and dishonesty” during a Thursday Master’s Tea at Jonathan Edwards College.
During a 90-minute discussion filled with jokes and mutual flattery, Swensen and Ellis discussed the success of Yale’s endowment, their personal career choices and advice on how financially-minded students can find jobs — but also fulfillment.
Jonathan Edwards Master Penelope Laurans, who moderated the conversation, began by bringing up a recent headline in The Wall Street Journal, which stated that “Yale Beats Harvard As Usual” in reference to the recent release of endowment returns for fiscal year 2015.
Swensen highlighted the importance of hiring and working with the right people to make Yale’s numbers as successful as they have been.
“The reason Yale can beat the market in every single equity [it] invests in is because we have 30 investment professionals, who are all incredibly well-educated and highly motivated, hardworking men and women of integrity,” Swensen said.
Ellis attributed much of Swensen’s success to the fact that Swensen only deals with companies and individuals he knows to be of unquestionable character.
Yale’s initial endowment success came from its diversified portfolios, Swensen said, and many universities, such as Harvard, Princeton and Stanford have since followed suit in using the method. What sets Yale apart now, he said, is recruiting top talent.
“I’m looking for people not trying to make as much money as possible for themselves, but instead trying to produce the best returns for the universities,” Swensen said. “And if they do that, they will do quite well for themselves. It’s a subtle difference, but incredibly important on whether Yale ends up succeeding wonderfully or not.”
In his own career, Swensen has demonstrated his commitment to just those priorities. When former economics professor James Tobin first contacted him about working at Yale, Swensen was working as a partner for the investment bank Lehman Brothers. Coming to Yale meant an 80 percent pay cut, but Swensen said by that point, he already knew Wall Street was not the place for him.
“It didn’t take me long to figure out that it was only about making money,” Swensen said. “I didn’t want that life where it was all about money and no balance between my professional and personal life.”
Both Ellis and Swensen encouraged students interested in finance to look beyond investment banking.
Swensen said that right now, too many smart young adults are going into finance — which would not be a problem if investment banks were making markets better or more efficient. Instead, Swensen said, banks are teaching young people the wrong priorities.
“[Investment banking] has morphed into something that is doing all sorts of things that have nothing to do with the basic provision of finance, but instead everything to do with individual greed and dishonesty,” Swensen said.
Ellis added that if he were starting his career now, he would not choose to go into finance or the investment world. Students should focus instead on developing their integrity and building a sense of self, he said, adding that students should never just take jobs, but instead take “components of a career” which can lead to long and successful employment.
Students in attendance largely agreed with the ideas Ellis and Swensen presented. Stella Woo ’18 said it was heartwarming to hear the two men speak of finance in such a positive light, adding that bringing Swensen to Yale had been a “brilliant move.”
Other students thought Swensen’s analysis of investment banks was fair, acknowledging problems in the industry, but stating that they probably come not from immoral people but instead from larger issues in the way the banks are structured.
When Swensen first arrived at Yale in 1985, the University’s endowment was valued at $1.3 billion. Today, it is valued at an all-time high of $25.6 billion.