Yale University's Endowment Climbs 8.9% in Fiscal 2010

The US’ second-largest university endowment reported today that its fund rose to $16.3 billion in the year to June, yet remains well below its 2007 peak valuation of $22.9 billion.

(September 24, 2010) — Yale University, whose investment strategy has paved the way for endowments at other universities around the country, has reported that its investments rose 8.9% to $16.7 billion in the past year ended June 30.

Despite the positive news, the fund remains well below its 2007 peak valuation of $22.9 billion. “While real assets provide protection against inflation, which may prove beneficial in today’s highly uncertain global economy, in weak economic environments real assets tend to produce poor returns,” the university said in a statement.

The returns trail recent gains by Columbia and Harvard universities, whose endowments increased 17% and 11% respectively. While Yale’s investment return is in line with what administrators said they had expected, it falls short of the 13.3% average return of other endowments tracked by Wilshire Associates, a California-based investment consulting firm.

Jane Mendillo, chief executive of the Harvard Management Company, expressed her confidence earlier this month in Yale’s strategy, an investing style — pioneered by David Swensen — that helped endowments beat market indexes by relying on assets such as commodities, real estate and private equity. “Has the “endowment model” run its course?”, she said. “Our answer to that question is No.”

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According to a letter posted on the fund’s website, Yale’s equity-oriented portfolio contains the following asset allocation targets:

  • Private Equity: 33%
  • Real Assets: 28%
  • Absolute Return: 19%
  • Foreign Equity: 9%
  • Domestic Equity: 7%
  • Bonds and Cash: 4%

To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742