Yale's investment chief, David Swensen sees enormous opportunity in downtrodden assets bonds and even equities. He believes what we are going through is just part of the deal when you invest.
Over the year's he has great success in growing Yale's endowment, taking it from $1 billion in 1985 to $17 billion today.
He believes that:
"“There are some really extraordinary opportunities in the credit world. Everything, from bank loans to investment-grade bonds to less-than-investment grade bonds, is priced at really extraordinarily cheap levels.”
He also believes that its foolish to get out of the market just because of the turmoil of the past few months:
"“There isn’t an investment strategy that can produce the kind of long-term results we’ve generated at Yale that isn’t going to post the occasional negative return. I don’t think people should disregard the book because of the market trauma of the last few months. We’re not even done with the current fiscal year. Judging a long-term investment strategy based on the results of a five- to six-month period is foolish beyond words.”
It's advice to general investors like me that I totally agree with. He says that most investors should stick to passive investments like index funds since attempts to beat the market are often unsuccessful. And when they are, the profits are usually eaten up by fees. That sounds like smart advice from someone who has an enviable investing record.
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