The Yale Endowment 2015 A Look At The 30-Year Performance
Yale’s 2015 endowment update is (finally) out. Always a fun read, and this year they dive into their successful PE investment program.
Quote, allocation, then download:
“Over the past twenty years, the venture capital program has earned an outstanding 92.7% per annum.”
The Yale Endowment 2015 – Introduction
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Yale’s Endowment generated an 11.5% return in fiscal 2015, producing an investment gain of $2.6 billion. Over the past ten years, the Endowment grew from $15.2 billion to $25.6 billion. With annual net ten-year investment returns of 10.0%, the Endowment’s performance exceeded its benchmark and outpaced institutional fund indices. For nine of the past ten years, Yale’s ten-year record ranked first in the Cambridge Associates universe.
Spending from the Endowment grew during the last decade from $567 million to $1.1 billion, an annual growth rate of 6.7%. Next year, spending will amount to $1.2 billion, or 34% of projected revenues. Yale’s spending and investment policies provide substantial levels of cash flow to the operating budget for current scholars while preserving Endowment purchasing power for future generations.
Thirty-Year Performance
In the mid 1980s Yale began moving away from a conventional portfolio model dominated by domestic equities and bonds to a diversified, equity-oriented asset allocation that promised higher returns and lower risk. In the past three decades the University’s Endowment more than met expectations, returning 13.9% per annum and exceeding results for traditional marketable asset classes by wide margins. In comparison, during the period, domestic equities generated 10.7%, foreign equities 8.7%, and domestic bonds 7.1% per annum. The University outperformed the equal-weighted mean return of colleges and universities measured by the National Association of College and University Business Officers by 5.0% per annum and bested its passive benchmark by 4.0% per annum over the thirty-year period.
Yale produced an investment gain of $35.2 billion over the past three decades, while aggregate Endowment gifts reached $3.1 billion. Over the thirty-year period, the aggregate spending distribution to the University’s operating budget totaled $13.9 billion.
By responding to the first principles of endowment investing—diversification and equity orientation—Yale produced an extraordinary three-decade record.
The Yale Endowment
Totaling $25.6 billion on June 30, 2015, the Yale Endowment contains thousands of funds with various purposes and restrictions. Approximately 84% of funds constitute true endowment, gifts restricted by donors to provide long-term funding for designated purposes. The remaining funds represent quasi-endowment, monies that the Yale Corporation chooses to invest and treat as endowment.
Donors frequently specify a particular purpose for gifts, creating endowments to fund professorships, teaching, and lectureships (24%); scholarships, fellowships, and prizes (17%); maintenance (4%); books (3%); and miscellaneous specific purposes (27%). Twenty-five percent of funds are unrestricted. Twenty-three percent of the Endowment benefits the overall University, with remaining funds focused on specific units, including the Faculty of Arts and Sciences (37%), the professional schools (26%), the library (7%), and other entities (7%).
Although distinct in purpose or restriction, Endowment funds are commingled in an investment pool and tracked with unit accounting much like a large mutual fund. Endowment gifts of cash, securities, or property are valued and exchanged for units that represent a claim on a portion of the total investment portfolio.
In fiscal 2015 the Endowment provided $1.1 billion, or 33%, of the University’s $3.3 billion operating income. Other major sources of revenues were medical services of $787 million (24%); grants and contracts of $674 million (20%); net tuition, room, and board of $318 million (10%); gifts of $156 million (5%); and other income and transfers of $281 million (9%).
See full PDF below.
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