David Swensen, chief investment officer of the Yale Investment Office
Courtesy of Yale University
For the past three decades, the Yale Investment Office, which manages the Ivy League university’s massive $29.4 billion endowment, has racked up returns that have been the envy of investors everywhere. And now Yale School of Management is launching a new master’s program in asset management and has gotten the endowment’s legendary Chief Investment Officier David Swensen to enter the classroom and teach in the new program.
The $75,000 program, the last significant announcement in Dean Ted Snyder’s tenure before he departs this Friday (see Yale SOM’s Snyder On The Durability Of The M7), is being developed with the (YIO), which pioneered the “Yale Model” that has outpaced all other major endowments over the last 30 years. Besides Swensen, Dean Takahashi, the senior director of YIO, will also teach in the program, and students will benefit from their experience combining quantitative and qualitative considerations in investment decision-making.
Swensen, dubbed the “Roger Federer of Investing” by Institutional Investor magazine, has an enviable record of managing money. Under his guidance over the past 32 years, the Yale endowment generated returns of 13.5% a year, a record unequaled among institutional investors. Prior to joining Yale in 1985, he spent six years on Wall Street, where his work focused on developing new financial technologies.
He and his colleague, Takahashi, will clearly be a major draw in a program aimed at early-career students direct from their undergraduate studies or those with less than three years of work experience. The initial program will launch in August of 2020 and run through May of 2021. Students will attend classes from Thursday evening through Saturday each week, getting training in all aspects of asset management, including investment theory, factor investing, and risk management, with a core focus on forward-looking quantitative methods and new technologies emerging in the fast-developing field.
SOM initially expects a cohort of between 20 and 25 students, with a steady-state enrollment of 50 to 60. Those candidates will be taught the application of data science and quantitative techniques to investment decisions. The course of study will emphasize the goals of investment management, including fiduciary responsibility and ethics, as well as investment performance.
This is the fourth specialty master’s program launched under Snyder, who ends an eight-year term as dean on July 1. Under his leadership, SOM also has created a master’s in systemic risk, a master’s of advanced management, and a master’s in global business and society.
Leading the effort as faculty director is SOM Finance Professor Toby Moskowitz who has been working with asset management firms for the past 15 years and a principal at investment firm AQR Capital Management. He believes graduates of the new specialized master’s will be much in demand by investment firms which typically hire undergraduate students who major in applied math and then them those recruits finance for their first year.
“The genesis of this program was to fill the void from an applied perspective with data and real-world problems,” says Moskowitz, “and to have people who teach it practice it for a living, including David Swenson from Yale endowment. “We are going to bring in many of our colleagues and collaborators to talk about how those two worlds meet. I don’t think it could exist without me and the finance faculty at Yale or the Yale Investment Office. It is truly a unique program and there is nothing quite like this.”
The most significant difference between SOM’s new program and existing master of finance or financial engineering programs at UC-Berkeley (see Meet The Quant Of The Quants: She Runs Haas’ Financial Engineering Program), Princeton University and MIT Sloan will be the more pragmatic application of quant thinking to practice, believes Moskowitz. “Those other programs are more about math and applying it to financial problems. Those programs are very good and attract very good students. In fact, I hope we will be competing with those programs. What is different here is that they don’t have the conjunction of professors and practitioners. Our program is much more about asset management and the entire industry. In addition to playing around with data, we will also talk to these leaders about compliance and regulatory issues. They need to understand the broader landscape. I don’t think that gets touched on in any of these other programs.”
Moskowitz says he and Swenson have discussed teaching the core course in the program together. But the school is still “ironing out the curriculum” which would likely require students to take 16 out of 24 half-semester courses. “I think the capstone would probably be in the form of a colloquium series where we will bring in some of the luminaries in this business to talk about what they did and how they did it. I am hoping that the students will learn to see how the stuff they learn in class will be applicable.”
Applicants, he adds, are not required to have a technical undergraduate degree. “What we are really looking for is analytical ability,” says Moskowitz. “The reality is we will probably attract a lot of computer science, engineering, and applied math undergrads, but we will welcome anyone who can handle the curriculum. We want some poets in there as well who can think analytically.”
Moskowitz, moreover, expects to bring into the coursework his current research on factor investing and detecting fake news on financial platforms. “I feel strongly that teaching should be very much connected to your research,” he says. “So this is a curriculum that is designed for me to bring the latest research into the classroom. I think that will be exciting for the students and certainly for the faculty. Some of this will be unfinished work. But I have benefited tremendously from applying the things I write and think about in practice. It gives me new ideas and that is a big part of what I want to bring in the classroom here.”
Moskowitz says there is clear demand for graduates of the program on both the buy-side and sell-side. “I work with AQR and other firms and they are constantly looking for talent. A lot of times we hire people because they demonstrated that they are smart. First-year analysts at top investment firms do pretty well but the path of growth can be tremendous. You can earn a lot of money very quickly as you rise through the ranks. The market is looking for a program that can identify the best candidates and teach them asset management.”
Yale SOM said it expects to encourage students from underrepresented backgrounds to enter the asset management industry and will provide scholarships and fellowships to that end.
