Yale's Endowment Turns In Another Stellar Year

Yale's David Swensen is a pioneer in multi-asset class investing. I've taken to reading Yale's annual reports to dissect Swensen's asset allocation and methodology. Something tells me I'm not the only one doing this. When Swensen inherited Yale's $1.5 billion endowment in 1985 their asset allocation was roughly two thirds stock and one third bonds. In the graph below, the first thing you will notice is how dramatically Yale's portfolio has changed over the years. Swensen has invested heavily in hedge funds, private equity, real estate, commodities and other alternatives. Today he has only 3.8% of Yale's portfolio in fixed income and just 11.8% in domestic stocks. I expect both of those figures to continue to trend lower. You can see in the graph below that Swensen has gotten progressively lighter on domestic equities over the past 10 years and recently he has gotten rid of most of his fixed income exposure:
Yale's $22.5 billion endowment is the second largest in the country behind Harvard's $34.9 billion endowment. But, Yale has been the top performing large (>$1billion) endowment over the last 22 years. This past year was no different as Harvard turned in a very respectable 22% return under Mohamed El-Erian and Yale put in a best of class 28% return:It is absolutely amazing that David Swensen is still at Yale and not running his own fund. If their was ever a guy who could raise $5 billion on a whim and immediately cash in it is David. There must be something else that drives him to stay in the ivory tower . . . .

Hat Tip: WSJ