Investment return of 3.4% brings Yale endowment value to $25.4 billion
Spending from the endowment, which is the largest source of revenue for the University, for Yale’s 2017 fiscal year is projected to be \\$1.2 billion, representing approximately 34% of the University’s net revenues. Endowment distributions to the operating budget have nearly doubled in the last decade, with an annualized increase in endowment spending of 5.9%. Those distributions support, among other priorities, Yale’s commitment to meeting the full financial need of every student enrolled in Yale College.
The University’s longer-term results remain in the top tier of institutional investors. Yale’s endowment returned 8.1% per annum over the 10 years ending June 30, 2016, surpassing broad market results for domestic stocks, which returned 7.5% annually, and for domestic bonds, which returned 5.1% annually. Relative to the estimated 5.1% average return of college and university endowments, over the past decade Yale’s investment performance added \\$7.1 billion of value in the form of increased spending and enhanced endowment value. During the 10-year period, the endowment grew from \\$18 billion to \\$25.4 billion.
Over the past two decades, Yale’s endowment generated returns of 12.6% per annum. Compared to the estimated 7.5% average return of college and university endowments, Yale’s investment performance added \\$22.1 billion of incremental value. During the 20-year period, the endowment grew from \\$4.9 billion to \\$25.4 billion, net of spending.
Long-term asset class performance
Yale’s 10-year asset class performance remains strong. Domestic equities returned 10.5%, besting the benchmark by 3% annually. Foreign equities produced returns of 13.7%, surpassing the composite benchmark by 9.5% annually. Absolute return produced an annualized return of 5.9%. Leveraged buyouts returned 11.2%, while venture capital returned 15.9%. Real estate and natural resources contributed annual returns of 4.9% and 6.1%, respectively.
Yale continues to maintain a well-diversified, equity-oriented portfolio, with the following asset allocation targets for fiscal 2017:
Absolute Return: 22.5%
Venture Capital: 16%
Foreign Equity: 15%
Leveraged Buyouts: 15%
Real Estate: 12.5%
Bonds and Cash: 7.5%
Natural Resources: 7.5%
Domestic Equity: 4%
Yale targets a minimum allocation of 30% of the endowment to non-correlated assets (cash, bonds and absolute return). The University further seeks to limit illiquid assets (venture capital, leveraged buyouts, real estate and natural resources) to 50% of the portfolio.
Yale’s spending and investment policies provide substantial levels of cash flow to the operating budget for current scholars, while preserving endowment purchasing power for future generations. Approximately 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.
Led by Chief Investment Officer David F. Swensen and operating under the guidance of Yale's Investment Committee, the Investments Office manages Yale's endowment.