Wednesday, April 1, 2009

Yale's Endowment & Its Famed Manager

In its April issue, Condé Naste Portfolio published a fascinating article about Yale's long-time endowment manager, David Swensen and his propagation of university endowments' move toward alternative investments, including private equity, venture capital, real estate, and commodities, among others. It is staggering that some of Yale's peer institutions shifted as much as 80% of their assets into alternatives.

As we have heard for many months and as this article reiterates, endowments at virtually all institutions, including Yale and those that followed its model, are suffering right now. Total assets are down by 25-30% or more. However, it is important to remember that alternatives as an asset class are not down as much as U.S. equities. So while alternative investments limit an endowment's liquidity, which can be a critical problem for a university, it is not clear that institutions that stayed away from alternatives entirely would have fared better on a returns basis.

"There was truly no place to hide," explains Sandra Ell, Caltech's chief investment officer.

1 comment:

MZ Capital said...

In his book, forgot which on, Swensen writes "Liquidity is overpriced. It is never there when you need it."

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