Yale Endowment Returns 11.5 Percent for Year, Eclipsing Harvard

Yale University reported on Thursday that its endowment generated a healthy 11.5 percent return for its most recent fiscal year, bringing its value to $25.6 billion.

As the major schools begin reporting their figures, Yale is likely to be among the best performers among schools with large endowments. It handily eclipsed Harvard University, which on Wednesday said it had earned 5.8 percent.

Yale's return for the year that ended June 30 trailed that of the Massachusetts Institute of Technology, which reported that it earned 13.2 percent. It also lagged Bowdoin College, a school with a far smaller endowment of $1.37 billion, which earned 14.2 percent for the year. Princeton University has not reported its figures yet, but it is estimated to have a return over 12 percent.

Yale, which had long been an industry leader, suffered during the financial crisis when its endowment performance dropped 24.6 percent for its 2009 fiscal year. But it quickly recovered in the following years. Last year, it led the endowment world with a 20.2 percent return.

Bowdoin and MIT have slightly outperformed Yale over a 10-year period. Yale's average annualized return was 10 percent. Bowdoin stands at 10.5, and MIT was also higher.

Princeton, too, is likely to exceed Yale's long-term performance. The average annual return for colleges and universities in the period was 6.6 percent.

Over a 20-year period, however, Yale remains the leader with an average annual return of 13.7 percent.

It is noteworthy that the endowment chiefs at all three schools - Paula Volent at Bowdoin, Andrew K. Golden at Princeton and Seth Alexander at MIT - all trained at Yale under David F. Swensen, that endowment's current chief investment officer.

Swensen, who has been at Yale since 1985, pioneered the concept of a portfolio that takes into consideration the long-term horizon of a university endowment. This allowed colleges to diversify their holdings beyond stocks and bonds, and into venture capital, natural resources and hedge funds, among other assets.

Swensen said that for Yale, last year was a "wonderful year for venture capital." He added that Yale had a target of about 30 percent of its assets in investments that are not correlated to the market - including absolute return funds, bonds and cash.

At Yale, the largest percentage of its fund, 21 percent, was invested in absolute return investment. The rest of the mix included leverage buyouts at 13.8 percent and foreign stocks at about 14 percent. Domestic equities accounted for only 4 percent of the portfolio.

Yale did not release performance results by category for a single year. Rather it releases results for the 10-year period.

It said Thursday that its best-performing sector in terms of average annualized returns for that period was venture capital at 18 percent, followed by foreign equities at 17.4 percent and leveraged buyouts at 13.8 percent.

© 2015 New York Times News Service