The University of Virginia’s fund also is tied with Bowdoin for the best 10-year return, 8.5 percent, according to data compiled by Bloomberg. The 10-year average annualized return for about 800 schools was 5 percent, according to the National Association of College and University Business Officers and money manager CommonFund.
Yale structures its partnerships with managers to align their incentives with the school, which doesn’t always have the bargaining power to negotiate better fees.
“Venture capital and leveraged buyouts present the greatest challenge, as the overwhelming demand for high-quality managers reduces the ability of limited partners to influence deal terms,’’ according to the report.
The heavy allocation to non-traditional asset classes stems from their return potential and diversifying power, according to the report, which didn’t offer specific insight about how the fund returned 3.4 percent, the highest return among at least the largest 100 college funds.
More Cash
Yale has reduced its allocation to U.S. securities over the past 30 years. In 1986, more than 80 percent of the fund was committed to U.S. stocks and bonds, compared to 11.5 percent in domestic securities and cash, according to the report. The endowment had a 4 percent allocation to domestic equities in fiscal 2016.
At its June 2016 meeting, Yale’s investment committee approved a cash target of 2.5 percent, up from zero, with an actual allocation of 2.3 percent as of June 30, the report said. Foreign equity increased to 14.9 percent, almost double the allocation in 2012.
Because Yale spent more than it earned, the value of the fund declined for the fiscal year, but by less than 1 percent.
The Harvard endowment’s investment loss was 2 percent for the fiscal year. That decline, combined with money spent, amounted to about $2 billion. The $35.7 billion fund has an annualized 10-year return of 5.9 percent, the second lowest in the Ivy League.
This article was provided by Bloomberg News.