“The Ivy Portfolio — How to Invest Like the Top Endowments and Avoid Bear Markets,” by Mebane T. Faber and Eric W. Richardson (John Wiley & Sons, 2009).

Meb Faber is a national treasure for investors and investment professionals alike. His website, The Idea Farm (www.theideafarm.com), provides thousands of dollars-worth of research for a low outlay of $19 monthly, or less if purchased yearly. Like the Energizer bunny, Meb seems to never sleep; the research he uncovers is sharp, to the point and always interesting.

Meb and Eric are both with Cambria Investment Management. Meb is the portfolio manager, and Eric is the founder and CEO.

“The Ivy Portfolio” is about the incredibly successful Harvard and Yale endowments and about how, by using the schools’ successful techniques, you may be able to minimize shocks, like the credit bubble of 2008, and maintain a kind of portfolio sanity while everyone in the world seems to have gone mad.

The authors give plenty of credit to others — Warren Buffett, David Swensen (the acknowledged master of the art of the university endowment and author of two successful books himself), and Roger Gibson and David Darst regarding asset allocation.  

The mechanics of each school’s methodology are interesting. Harvard seems to run things like “an in-house hedge fund,” while Yale outsources lots and has far fewer employees devoted to the endowment than Harvard. At times, Harvard has had 175 people to Yale’s 25.

While Harvard may have started the endowment financial-management idea, Swensen — of Yale — honed it to a fine art.

I love the story of how Harvard folks got upset when some of the school’s managers received high bonuses — high meaning, in this context, in the millions of dollars. There was an outcry, even though the total expense at the time may have been less than 0.5 percent. Eventually, the manager left and started a hedge fund, to which Harvard subscribed a large sum, thus increasing its costs substantially. It’s like an out-of-town expert being better because he or she is from — you guessed it — out of town. 

Here’s the thing: This is a book about how to use the techniques of the kings and queens of the college endowment world to keep your portfolios safe from the ravages of bubbles and crises. The authors know that it’s difficult to replicate investing in things exactly the way the endowments do it, so along the way, they provide reasonable alternatives. (Even Yale’s portfolio is not bulletproof. Its private equity portion was down about 23 percent in 2002, but it was up a heart-stopping 168 percent in 2000.)

But this is not about being bulletproof — only Superman is bulletproof. This is about being better, and the authors demonstrate that one can do a pretty decent job of using ETFs to replicate Yale-like returns with private equity. The final score: Yale’s average is 23.34 percent yearly, and the ETF portfolio is 20.39 percent — so a good result.

The authors are good at showing the whys, hows and wherefores of all the things the experts at Harvard and Yale do. (And they show you sample similar portfolios using funds and ETFs.) “The Ivy Portfolio” will make you a better investment professional. You might also give Mebane Faber’s website (www.theideafarm.com) a careful look.

 

“AMA Business Boot Camp — Management and Leadership Fundamentals That Will See You Successfully Through Your Career,” edited by Edward T. Reilly (American Management Association, 2013).

This AMACOM book demonstrates how the American Management Association has helped millions of men and women, around the globe, become better managers and executives.

As to boot camp, I still remember my 12 weeks at Great Lakes Naval Training Center — extremely important so that new sailors (like me, at the time) know how to work together to attack or defend and how to deal with many scary scenarios, including one of the most dangerous: a ship’s fire at sea. Really, boot camp is about teamwork, isn’t it?

This book is all about transitioning from being one who works to becoming one who gets “work done through the efforts of others.” As such, it deals with the fundamentals of the motivation, delegation and coaching of people for superior overall performance.

Being in charge is an entirely different experience, whether you are responsible for two or three employees or more than 100. Here are some of the skills you may learn by reading “Business Boot Camp”:

  • Define a new role (as a manager), create a healthy and productive working environment and determine how to best communicate within an organization.
  • Uncover sources of employee motivation, delegate for growth and development and coach others to superior performance.
  • Manage staff changes with ease, minimizing workforce disruption, and become adept at recruiting, interviewing and selecting the right person for the job and the organization.
  • Keep up with the pace and demands of managing projects, from setting up the scope and putting together a team to delivering results on schedule and on budget.
  • Think strategically and act tactically, develop a longer term vision and strategic frame of reference and balance making vision reality through operational work.
  • Determine leadership style, project a leadership image, build power and influence and participate in office politics ethically to fulfill each mission.
  • Excel at managing and motivating a diversity of “difficult” people, including complainers, backstabbers, stallers, emotional hotheads and perfectionists.

You may think, as a financial advisor, that you don’t need management skills, but, really, you do. All of us need them. If your team doesn’t see fairness and professionalism in your work attitudes and skills, if they can’t get a fix on what is expected in terms of customer service, you may be dooming your practice to mediocrity without even realizing it.

Have you ever worked with a difficult person? “Boot Camp” even has a wonderful seven-step program to help you find out what the real underlying problem is. The difficult person’s apparent problem is likely to be only a smokescreen; the trick is to find and deal with the real issue.

All in all, “Boot Camp” is a great way for you to get 90 years’ worth of AMA experience in 236 pages of common sense and sage advice.

Evaluation copies of software and review copies of books are sometimes furnished by publishers without charge. However, Mr. Hoe only reviews books and programs he feels will be of value to LifeHealthPro readers and avoids writing reviews he feels would be of little interest to financial professionals.