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Ralf Lochmüller

It’s all about people

3 lessons from the model by David Swensen

Tens of thousands of new books are published each year in Germany alone – but more often than not, only one of them will touch us more deeply and stick with us longer than any other. More than 20 years ago, Ralf Lochmüller, CEO and Managing Partner of Lupus alpha, picked up a book called “Pioneering Portfolio Management” that continues to influence him to this day. He used his opening speech to pay tribute to the author of this seminal work on professional asset management, David Swensen. “This book had more of a lasting impact on my understanding of portfolio management than any other,” said Lochmüller.

David Swensen was Chief Investment Officer at Yale University, where he was responsible for preserving and growing the University’s endowment fund. During his 35 years as CIO, Swensen generated an average annual return of 13.1% for the University. Sadly, he passed away far too soon in the summer of 2020 after a long illness. This pioneering investor spoke at Lupus alpha Investment Focus on two occasions: once in 2004 – his first such appearance in Germany – and again in 2017.

Ralf Lochmüller took three points in particular from the Yale Investment Model developed by Swensen. Firstly, the fact that the Yale portfolio had a consistent, long-term direction with a clear focus on equities. Swensen favoured inefficient market segments such as private markets, as well as small and mid caps. The second key element was the counter-cyclical rebalancing of the portfolio, which enabled him to stick to his asset allocation strategy even in difficult times. The third point can best be summed up by the original quote: “It’s all about people – people make the difference”. Swensen set extremely high standards when selecting his team and external managers, choosing small, focused, independent asset managers over big players. This often resulted in successful long-lasting partnerships.

“My conversations with David Swensen,” Lochmüller concluded, “gave me both motivation and a warning. They were a warning to never lose sight of our goal – to provide you, our customers, with optimal asset allocation support thanks to our specialised, high-performing investment strategies. And they motivated me to make sure that when you talk about your collaboration with us, you say: “It’s all about people”.