David F. Swensen, Yale University's chief investment officer from 1985 until his death this month, developed the "Yale model" of investing, which included embracing less-liquid asset classes such as leveraged buyouts and venture capital. Over the 10 years ended June 30, Yale's endowment nearly doubled to $31.2 billion and produced a 10.9% annual return net of fees, besting its benchmarks and placing it in the top 2% of colleges and universities.
Shifting allocations: Within private equity, venture capital allocations rose to 22.6% from 10.3% over the past 10 years, while leveraged buyouts fell to 15.8% from 24.8%. Domestic equities made up just 2.3% of the endowment's asset mix in 2020 vs. 1997's 21.5%.
Change in asset allocation
Benchmark busters: Among the more impressive asset-class performances over the 20 years through June 2020 were buyout and VC strategies, at 11.2% and 11.6%, respectively; international equities, which returned 14.8% annually; and natural resources, with a 13.6% return.
20-year average annual return
Cash cow: The endowment's strong returns allowed it to fund a greater portion of Yale University's operating budget. The $189 million spent in 1997 covered about 17% of the school's operating budget revenue, while in 2020 the endowment's $1.4 billion contribution accounted for greater than one-third of revenue.
Contribution to Yale's budget
Family tree: After working under Mr. Swensen, endowment employees have gone on to take prominent investment positions at major non-profit and investment organizations. Thus, his investment legacy continues, benefiting a new generation.
Seth D. Alexander President, MIT Investment Mgmt. Co.
Peter Ammon CIO, University of Pennsylvania
Donna Dean Former CIO, The Rockefeller Foundation
Andrew K. Golden President, Princeton University Investment Co.
Randy Kim CIO, Rainwater Charitable Foundation
Anne Martin CIO, Wesleyan University
Mary McLean Former CIO, Ewing Marion Kauffman Foundation
Lauren Meserve CIO, The Metropolitan Museum of Art
Kimberly Sargent CIO, David & Lucile Packard Foundation
D. Ellen Shuman Co-founder, Edgehill Endowment Partners