If Yale isn't smart enough to beat the market, who can?

Yale University's endowment is the second largest in the United States and it took a major hit in the last year. The interesting thing is that for years, Yale's chief investment officer, David Swensen, was widely respected as an investment guru. Unfortunately, the trendy touchstones of his investment strategy did not look so smart last year.

And it leaves open an unpleasant question: When you consider that the smart money -- people who run the biggest pools of money -- charges 2 percent of assets and 20 percent of the profits it earns for clients, is the smart money really smart? Or did it just get into the right clubs that all breathe the same rarefied air and follow the same investment strategies? And if the smart money is no smarter than the rest of us, what's the point of trying to predict the future and invest in it?

These questions come to mind when examining the details of Yale's recent performance. Its endowment fell 24.6 percent in the year ending June 2009 -- "beating" the 18 percent median decline of large university endowments. And the biggest hits came in the parts of its portfolio that had previously been seen as works of investment genius.