(February 28, 2014) — Yale University has claimed that while
alpha isn’t dead, opportunities to
access it today may not be available to all investors.
Writing in its
annual report, the endowment’s
investment office rejected views that the recent drive by other investors into
the alternatives markets had reduced the ability to outperform.
alternatives-heavy and highly illiquid strategy championed by long-time Yale
CIO David Swensen has often attracted criticism, not least because the so-called
Model led to catastrophic losses of $6.5 billion in 2009—a 24.7% reduction
of the endowment's value.
For 2013, the
endowment produced a 12.5% return on investments in the year ending in June,
beating the 11.3% average for foundations and endowments, according to Wilshire
report stressed that manager selection and having a sophisticated investment
team meant it was confident of recovering the losses from the financial crisis
in the near future.
consistently demonstrated its ability to identify high-quality active managers.
For the 20 years ending June 30, 2013, 57% of Yale’s outperformance relative to
the median Cambridge Associates endowment was attributable to the value added
by Yale’s active managers,” the report said.
“Over the past
two decades, the endowment returned a cumulative 1,152% relative to the
Cambridge median of 402%, an outperformance of 5.1% per annum.
was able to generate alpha even as alternative assets became increasingly capitalized
and competitive. Manager selection remains an important differentiating factor
On average, US
universities’ allocated 53% of their portfolios to alternative strategies in
2013, down from 54% the year before, according to data from Nacubo and
Among some of
the asset allocation changes made in June 2013 by Yale were the increase in
absolute return funds to a target of 20% from 18% and the lowering of the
private equity target to 31% from 35%, according to its report. It also increased
foreign equity targets to 11% from 8%.
The full report
can be found here.
office also revealed it has collected $36 million in donations in Swensen’s
honour. Swensen, 60, has been the university’s chief investment officer since
1985, and pioneered the alternative investment strategy.
raised through the Swensen Initiative will be invested in Yale’s Endowment.
the Yale Model Dead? and Four
Questions to Ask When Jumping into Alternatives