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My Two Cents

Jeremy Grantham

Chris Farrell May 25, 2007

Jeremy Grantham is a legendary value investor. He’s also the founder and chairman of GMO, a Boston-based global investment-management firm with $145 billion in assets (including Vice-President Dick Cheney’s money).

David Swensen is the chief investment officer for Yale University’s endowment fund. He is hardly a household name, yet when David talks about money and investing it pays to listen. For the past two decades, Swensen has put on a stellar performance at Yale. In the storied rivalry between Harvard and Yale, a competition waged on athletic fields and academic departments, the Bulldog bests the Crimson in the investment sweepstakes over the past two decades-plus.

Thanks to Jim Grant of Grant’s Interest Rate Observer, we have some notes from a talk Swensen recently gave to a roomful of active managers. Swensen noted that Grantham lagged behind during the bubble market of 1997, 1998 and 1999. The reason is that he was buying legitimate companies with real earnings. Yet a lot of institutional investors “fired” Grantham for his poor performance. Yet when Swensen looked at the period 1993 to 2003 Grantham did extremely well. “I think it’s a stunning indictment of active management by institutions, because even though they are smart enough to find someone who is a winner,” said Swensen, “they end up shooting themselves in the foot with their cash flows.”

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