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TheStreet Open House

Fund Lessons From David Swensen

NEW YORK ( TheStreet) -- David Swensen has made a name for himself as the head of Yale University's $16 billion-dollar endowment.

While his successful investing style involves holding assets that have traditionally been out of reach for the average investor, this has not stopped them from trying to mimic it. In fact, his method has become so well known it is now referred to simply as the "Yale Model."

Swensen, who received his BA and BS from the University of Wisconsin in 1975, wrote his dissertation for his PhD at Yale's school of Economics on the valuation of corporate bonds. The dissertation land a job on Wall Street with Salomon Brothers where he had gathered data for a team.

Swensen made Wall Street history in 1981 with Salomon by structuring the first-ever swap transaction. That led Lehman Brothers to hire him the next year to run the firm's swap group.

At Lehman, he was approached by Yale which was interested in hiring him to manage the university's endowment then valued at $1 billion. Although he had no prior experience managing an endowment and the new position would come with a big pay cut, he took the position and has remained there since.

In his 24 years at the helm he has returned average annual gains of 16.3%. This successful record was tainted recently when, in the midst of the worst of the global economic recession, the endowment reportedly lost nearly 25% of its value. This was largely due to its heavy exposure to energy and real estate.

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