Hi {{first_name}},

We talk a lot about David Swensen in this newsletter.  For good reason, he was an early champion of private markets, an educator to his core, and brutally honest about performance and expectations. I believe in that. 

His work at the Yale Endowment is the proof case for alternative investing. He took Yale from $1 billion to over $41 billion, over his thirty-six year tenure, by allocating heavily into private markets when the rest of the institutional world was still doing 60/40. He built the framework. Every institutional allocator working today is operating in the system he built.

He also wrote two books at the height of his influence. One for institutions. One for individuals. Yet he offered opposite advice in each, creating a contradiction. I call it the Swensen Gap.

But things have changed a lot since the time Swensen published those books. Today the Swensen Gap is closing due to a series of changes including congressional. There’s a private market evolution that has broken down the old advice.  New investors can access the same strategies that enriched institutions for decades. 

Your personal portfolio will operate on its own scale and against your own time horizon, but the walls are coming down and opportunity has opened. 

I made my first investment in 1999. Then I watched as the S&P wrapped up 2009 roughly where it started in 2000. A handful of companies were doing exactly what the markets had promised (Apple, Amazon), but the index was averaging it all away.

Meanwhile I was running my own companies. Hiring, winning customers, building products. The compounding was real and it was visible. I believed in the work of entrepreneurs. I loved my life as one. So, I decided to scale the returns I was already producing by allocating into the work of other entrepreneurs. Private businesses. Real estate. Private credit. Oil and gas.

It was only years later that I picked up on Swensen’s advice and realized I'd been operating in his framework.  

The gap that Swensen outlined in his books existed because of three walls: Access. Governance. Time horizon. In 2005, all three were working against entering alternatives. But today, two have collapsed. The third, time, stands but you can build that deliberately.

Here's what's in this week's issue:

Let’s see the shift in action.

— Walker Deibel
WSJ & USA Today Bestselling Author of Buy Then Build
Founder, Build Wealth

David Swensen ran Yale's endowment from 1985 until his death in 2021. His annualized returns exceeded 13% over that stretch, compounding through downturns, crises, and multiple market cycles. He did it by moving aggressively into private equity, venture capital, real assets, and by building the machinery to select the operators running those assets.

Two Books for Two Audiences

He wrote two books about what he learned.

The first, Pioneering Portfolio Management, came out in 2000. Written directly for endowments and institutional allocators, he argued that the move to make was into private markets and avoiding public bonds. To build a 30-person team and to obsess over manager selection. Basically the Yale Model in simple terms.

The second book was more approachable for the individual investor. Unconventional Success, came out in 2005 and here he argued the opposite. You should buy index funds and avoid alternatives. Essentially try to stay away from private markets. You don't have the team, the access, or the relationships to do what Yale does.

Same data. Two opposite prescriptions.

Swensen was always honest about why his investing decisions worked. Yale's outperformance wasn't always about owning the right asset classes. Instead by the endowment's own accounting, 60% of the edge came from manager selection. Picking the right operators is the key indicator of success. And in 2005, the average individual investor had no realistic path to replicating that selection process. Private deals lived inside institutional networks and had personal relationships where knowledge was earned and shared, in other words the legal version of insider trading. 

Minimums for top-quartile private equity funds started at $5 million. The regulatory environment since 1933 prohibited public marketing of private securities. An individual trying to access private markets in 2005 was overwhelmingly likely to end up in the bottom half of managers while paying institutional-grade illiquidity for the privilege.

So Swensen told individuals to be mindful and stay out. His index fund recommendation was the honest advice for the investor he was writing for, given the market that existed at the time. But that market is disappearing. The walls separating Swensen’s audiences are coming down. 

The Wall Against Access

The JOBS Act took effect in September 2013. Title II legalized general solicitation under Rule 506(c), opening private securities to public marketing to accredited investors for the first time since 1933. The regulatory wall that had confined private deals inside personal networks came down by an act of Congress. What followed was the sponsor-led raise: operators with real-asset opportunities raising directly from accredited investors at ~$25,000 to $250,000 minimums, with structured diligence and professional communication. Private equity sat at roughly $1 trillion in 2005 when Swensen wrote his second book. Today private markets have grown into a multi-trillion-dollar industry exceeding $11 trillion in assets. It didn't grow to this excess by accident. Because more than access has shifted. 

The Wall of Governance

Allocator-style frameworks that were proprietary to family offices and endowments fifteen years ago are now in the public domain. The infrastructure of institutional decision-making is technically accessible to anyone who has some dollars to invest and wants to do the work to use it. Educational communities built around private market investing, including this one you are reading, have accelerated that ability.

The gap Swensen identified between institutional investors and individual investors has been narrowing for ten years now. Now you get to think about how your own portfolio has evolved.

Swensen's individual investor advice assumed a permanent residence in stage one or two. The infrastructure changes of the last twelve years have made stage three available to accredited investors who are ready to reach for it.

The question we all need to consider now is, what book Swensen would write in 2026. He was constitutionally honest. He gave different advice to different audiences because the market wasn’t the right fit for everyone. That has drastically changed. The gap that put individual investors outside alternatives is evolving.

If you want the full framework on why manager selection drives ~60% of the returns in private markets, and how to think about operator selection as a skill, the prior issue Good is the Enemy of Great covers it in depth. 

Plus, this week we built a report that highlights how alternative allocations are shifting. Check it out here.

Image: Our new opportunity, Rollick (BuildRise III). A ground-up construction building in St. Louis. 

Building Institutional-Quality Portfolios

Yale's endowment, under David Swensen's framework, allocated about 70% of capital to alternative assets: private equity, real estate, venture capital, and hedge funds. The average accredited investor is still concentrated in public equities and sitting on the sidelines of the private markets. This is the Swensen Gap and closing it is the key to scaling wealth to ultra-high-net-worth levels within a single generation.

Build Wealth was built around solving exactly this problem for accredited investors. The platform was founded with two core motivations. The first was scale. After years of acquiring and operating small businesses, the goal was to expand the model by investing through experienced operating teams. Particularly in growth capital situations where the underwriting favors asymmetrical return profiles. The second was diversification into institutional-quality real estate, an asset class with tangible value, differentiated return drivers, and a risk profile distinct from operating businesses.

Those two motivations turned out to have the same problem. Accredited investors in the $1M–$5M net worth range lack the deal flow, operating relationships, and negotiating leverage to access the same opportunities available to institutions and family offices. Build Wealth bridges that gap by pooling a community of accredited investors together. This allows members to co-invest together, work through vetted operators, and negotiate better terms through volume. 

In the past 2.5 years, Build Wealth has launched 12 funds across private equity, real estate, private credit, and oil and gas — surpassing $50M raised and deployed.

The current opportunities include:

That next closing, our ground-up construction building, Rollick (aka BuildRise III) mentioned above is going up in a perfectly situated area of St. Louis. If you are interested in learning more, check it out now.

The infrastructure needed to access these deals with deal flow, operator relationships, co-investment structures, and institutional-style diligence is no longer reserved for the ultra-wealthy. We are on a mission to close the gap for investors like you. That's the entire thesis behind Build Wealth.

Swensen's advice expired because the infrastructure to move around alternatives has changed. With new opportunities and more open doors, we need to ask ourselves, how should an accredited investor break into private markets and at what pace?

First off, you don't abandon index funds and go all-in on alternatives. You build toward private markets the way the endowments built toward them. Deliberately, in stages, with each one earning access to the next.

Stage 1: Build the floor with public markets.

Index funds are the foundation before you look at anything else. 

A diversified low-cost equity portfolio with a written allocation policy and a tolerance for volatility is needed. Swensen was right about this in 2005 and remains right in 2026. The floor has to be solid before you build on top of it.

Become active rather than passive with a written allocation policy. State your target allocation across public equities, private credit, private equity, real assets, and cash. And drawdown tolerances for each sleeve. 

What do you do when equities are up 40% in a year and what do you do when they're down 30%? The document pre-commits your decisions before the moment of maximum panic arrives. 

Stage 2: Enter private markets through the low-volatility door.

The first private allocation most accredited investors should make is private credit, in fact we refer to it as foundational. Private credit is contractual yield. The return is defined in the loan agreement. It behaves differently from public equity and provides real income without the J-curve that makes early-stage private equity difficult for new investors.

Fear tends to pop up here. The hardest part of entering private markets is experiencing illiquidity without panic. Private credit gives you that experience at the lowest variance. A fund generating 11 to 13% annualized with semi-annual distributions teaches you what it feels like to own something you cannot sell on any given Tuesday. 

Start small though with a one to one ratio. One allocation to one operator. 

Keep an eye on them through a full distribution cycle. The information you gain is worth more than any pitch deck anyone will give you.

Stage 3: Layer in appreciation assets on top of income.

Once the income layer is functioning and you have watched at least one operator return capital on schedule, stage 3 is ready to deploy. This could mean private equity in operating businesses, ground-up real estate development, energy programs with meaningful upside, venture positions in asymmetric opportunities. These are the positions where the gap between top-quartile and median operators is still wide. Swensen's manager-selection insights still ring true.

Pay attention to operators who run multiple vehicles, communicate transparently when conditions change, have meaningful personal capital in every deal, and have a track record across at least one full cycle. The institutional allocators Swensen described built twenty-year operator relationships. You are building that too, just at a different scale.

The single biggest mistake accredited investors make when they reach this stage is moving too fast. Start small with new operators. Commit your capital after you have witnessed them navigate a difficult market cycle. See what choices they made to stay on top.

Stage three is the time to deploy capital through operators who have earned your trust over time. This is how the endowments built it. With governance first, then entering private markets through the most legible return profiles, into higher-complexity positions as relationships became stronger. 

Your time horizon is the institutional advantage you already have. You can cross the bridge to private allocation by earning your way through each stage at your own measured pace.

"The willingness to take a contrarian stand, accepting the inevitable pain of being wrong in the short term, lies at the heart of investment success." — David Swensen, Pioneering Portfolio Management

What Yale bought with billions, you're buying with time.

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This is not financial advice. Illustrative output of a reasoned thought experiment. Not a backtest, guarantee, or prospectus. Actual results vary based on market conditions, fund selection, timing, fees, taxes, and factors not modeled. Private credit, CRE, and leveraged strategies involve significant risk including loss of principal. Consult a qualified financial advisor.