Now they can afford the extra-absorbent paper towels at Woodbridge Hall.
Yale University’s endowment earned a 5.7-percent investment return for the year ending June 30, increasing its value over the 12-month fiscal year from $29.4 billion on June 30, 2018, to $30.3 billion on June 30, 2019, the university announced Monday.
That figure trails only Harvard (the wealthiest university in the world, with a $38.3 billion endowment) and Stanford ($30.8 billion as of Sept. 1).
Yale’s endowment is the largest single source of revenue for the university. It supports faculty salaries, student scholarships, and other expenses.
Total spending for Yale’s 2020 (current) fiscal year is projected to be $1.4 billion, representing roughly 34 percent of the university’s net revenues.
Yale’s long-term results remain in the top tier of institutional investors. The school’s endowment returned 11.1 percent per year over the 10 years ending June 30, 2019. That performance actually trails overall market results for domestic stocks, which returned 14.7 percent annually over the same period.
Yale’s endowment returned 11.4 percent per annum over the 20 years ending June 30, 2019, exceeding broad market results for domestic stocks (which returned 6.4 percent annually) and for domestic bonds (4.9 percent annually). During the 20-year period, the endowment grew from $7.2 billion to $30.3 billion.
Asset allocation
Under Chief Investment Officer David F. Swensen, who assumed the university’s top investment job in 1985, Yale continues to maintain a diversified, equity-oriented portfolio, with the following asset allocation targets for fiscal 2020:
|
Absolute return: |
23% |
|
Venture capital: ADVERTISEMENT
|
21.5% |
|
Leveraged buyouts: |
16.5% |
|
Foreign equity: |
13.75% |
|
Real estate: |
10% |
|
Bonds and cash: |
7% |
|
Natural resources: |
5.5% |
|
Domestic equity: |
2.75% |
Yale targets a minimum allocation of 30 percent of the endowment to market-insensitive assets (cash, bonds and absolute return). The university also seeks to limit illiquid assets (venture capital, leveraged buyouts, real estate and natural resources) to no more than 50 percent of the portfolio.
Over 34 years Swensen’s performance is virtually unparalleled throughout the institutional-investments industry
PHOTO | Courtesy Yale University
Yale’s spending and investment policies are intended to provide cash flow for the operating budget while preserving endowment purchasing power for future use, according to the university. Roughly a quarter of spending from the endowment is specified by donors to support professorships and teaching. Nearly a fifth is dedicated to scholarships, fellowships, and prizes. A quarter is available for general university purposes. The remaining endowment funds are donor-designated to support specific departments or programs.
Endowment distributions to the operating budget have increased at an annualized rate of 8.5 percent over the past 20 years. Those distributions support, among other priorities, Yale’s commitment to meeting the full financial need of every student enrolled in Yale College.
