Mebane Faber author and developer of an investment timing strategy outlined in his book The Ivy Portfolio recently appeared on CNBC. He is also a portfolio manager with Cambria Investment Management and Co-founder of Alpha-Clone. College endowment funds are known for their market beating performance with less volatility. Faber researched the top endowments to analyze how they accomplished this amazing feat and developed a timing strategy suitable for private investors based on his findings.
Faber said that Harvard and Yale endowments beat the S&P 500 Index by 4% a year with a third less volatility. He explained that endowments typically use a globally diversified asset class strategy with both U.S. and foreign stocks real assets such as commodities and real estate and alternative investments with private equity and hedge funds. Endowments generally only have a “sliver” in bonds according to Faber.
His tactical timing strategy produces market beating performance with lower draw downs and volatility. Amazingly the returns from 2008 using his timing strategy would have been about flat. The strategy was back tested from 1900 to 2008 and it produced a 10.45% return vs. a 9.21 % return for the S&P with the timing model having 12.02% volatility and a 17.87% volatility rate for the S&P. I definitely look forward to reading his book.