Ivy Portfolio by Meb Faber

The Ivy Portfolio by Meb Faber is a multi-asset allocation strategy that attempts to replicate the investment approach of elite university endowments -- particularly those of Harvard and Yale -- using low-cost index funds accessible to individual investors. Faber, co-founder of Cambria Investment Management, introduced the concept in The Ivy Portfolio: How to Invest Like the Top Endowments and Avoid Bear Markets, co-authored with Eric Richardson and published in 2009. The static version of the portfolio holds a simple equal-weighted mix of five asset classes: US equities, foreign equities, bonds, real estate, and commodities.

Investment Philosophy

The endowment model pioneered by Yale's David Swensen emphasised broad diversification across non-traditional asset classes -- including real assets and alternatives -- rather than concentrating in stocks and bonds. Faber's insight was that a simplified version of this approach, implemented with five low-cost index funds equally weighted, could capture much of the benefit of the endowment model while remaining practical for retail investors. The static portfolio version does not apply any timing rules, relying instead on annual rebalancing to maintain the equal weights.

Who It's For

This portfolio suits investors who want broader diversification than a standard equity-bond portfolio, including exposure to real assets like commodities and real estate. It is appropriate for medium-to-long time horizons and investors comfortable with the volatility of commodity holdings. For tactical versions that apply trend-following signals to the same asset classes, see GTAA 5 and GTAA 13.

Pros

• Simple five-asset, equal-weighted structure is easy to understand and implement
• Meaningful exposure to real assets that may perform well during inflationary periods
• Diversification across asset classes that respond differently to economic conditions

Cons

• Equal weighting is arbitrary and not necessarily optimal for any particular investor's risk profile
• Commodities have historically underperformed stocks and bonds over long periods on a buy-and-hold basis
• No timing or trend-following overlay means the portfolio holds commodities and equities through sustained downtrends