The Yale Endowment 2015 Report: 92.7% per annum Venture Capital Returns – ValueWalk Premium
Yale Endowment 2015

The Yale Endowment 2015 Report: 92.7% per annum Venture Capital Returns

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.”

Yale Endowment

The Yale Endowment 2015 – Introduction


Yale Endowment 2015

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.

Yale Endowment 2015

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%).

Yale Endowment 2015

See full PDF below.


Comments (4)

  • Brad Case, PhD, CFA

    If Yale’s VC portfolio has earned 92.7% per year for 20 years, and today is worth $4,168.25 million (=$25,572.1 million times 16.3%), then Yale seems to have started its VC portfolio with $5,270. (That is, $5,270 x 1.927 raised to the 20th power equals $4,168.25 million.) In other words, if we assume that Yale started with slightly more than five thousand dollars and never put a single additional dollar into its VC portfolio (but didn’t withdraw any dollars from it either), and if Yale truly earned 92.7% per year on it, then it would be worth what Yale says it is worth today.
    Does anybody else join me in thinking that just can’t possibly be true–at least not in the way that ordinary people of normal intelligence interpret the language that they’ve used?

    April 17, 2016 at 2:25 pm
    • Brad Case, PhD, CFA

      Similarly, Yale reports that its VC portfolio has earned 33.8% per year since inception in 1976, which suggests that it could have started with as little as about $20,540 and grown to its current size with no additional investments, only investment returns. Again, does this strike anybody else as complete poppycock?

      April 17, 2016 at 2:36 pm
      • Brad Case, PhD, CFA

        Also, if the returns on Yale’s VC portfolio have averaged 33.8% per year since 1976 and 92.8% per year over the past 20 years, then the returns seem to have averaged -4.62% per year from inception in 1976 through 1995. Does anybody believe that’s true?

        April 17, 2016 at 2:51 pm
    • Brad Case, PhD, CFA

      I think that starting value should have been $8,362. (Sorry, I’m working from a computer whose keyboard is not working properly.)

      April 17, 2016 at 2:49 pm


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