Warren Buffett Was Right: What the Wise Do in the Beginning, Fools Do at the End Yale’s Model Worked Until Everyone Copied It Warren Buffett has a line that cuts through decades of chasing hot strategies: what the wise do in the beginning, fools do at the end. He wasn’t calling anyone stupid. He was describing how capital chasing performance destroys performance. Yale’s endowment model just proved it. Over three years ending June 2024, Yale returned 6.2% annually. A boring 70/30 stock-bond mix would’ve doubled that. UC’s simple index fund returned 15%. Princeton managed 4.3%. A tiny New Jersey state college with zero private equity beat them at 11.5%. The Neuberger Berman study covering 2014-2024 found average endowments matched a 70/30 mix. After decades of complexity and high fees, institutions landed exactly where they’d be doing nothing. Alpha isn’t permanent. It’s what happens when the right strategy meets the right moment before everyone else arrives. David Swensen pioneered the Yale model in the 1980s. He backed emerging PE managers when the asset class was small and mispriced. Returns were huge. Then consultants sold the formula. Every endowment copied it. Schools hired Yale’s former staff. Early investors found pricing inefficiencies. Later investors bid them away. By the time every university was chasing the same deals, the premium vanished. The model didn’t fail because it was wrong. It failed because too many people found it. This pattern repeats everywhere. Value investing works after crashes. Growth works in expansions. Real estate value-add worked in 2010. By 2018 it was crowded. Now many of those operators are underwater. The cycle: discovery, adoption, saturation, decay. Institutions should see this coming. Many don’t. Career risk prevents it. No one gets fired for copying Yale. The hard part isn’t knowing your style. It’s sticking to it when it’s out of favor. UC launched their index fund in 2017 when PE was consensus. Boring became radical. Seven years later they’re crushing the Ivy League. Discipline isn’t staying consistent when you’re winning. It’s staying consistent when consultants pitch something sexier and your approach is underperforming. Yale’s 20-year return: 9.7%, best in Ivy League. Their 3-year return: 6.2%, barely half the index. Same team, same approach. The capital environment changed. The strategy didn’t change. The weight of money following it did. [Link to Bloomberg article] https://lnkd.in/ekpRQCTR