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.
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“Over the past twenty years, the venture capital program has earned an outstanding 92.7% per annum.”
The Yale Endowment 2015 – Introduction
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.
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.