Yale announced their endowment figures last week.
Yale’s endowment earned a 5.7% investment return (net of fees) for the year ending June 30, 2019. The endowment value increased from $29.4 billion on June 30, 2018, to $30.3 billion on June 30, 2019.
Spending from the endowment — which is the largest source of revenue for the university and supports faculty salaries, student scholarships, and other expenses — for Yale’s 2020 fiscal year is projected to be $1.4 billion, representing approximately 34% of the university’s net revenues. Endowment distributions to the operating budget have increased at an annualized rate of 8.5% 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.
Growing its distribution amount 8.5% annually for 20 years is only possible if the principal grows as well.
Yale’s 20-year asset class performance remains strong. Domestic equities returned 11.4%, besting the benchmark by 5% annually. Foreign equities produced returns of 14.7%, surpassing the composite benchmark by 8.4% annually. Absolute return produced an annualized return of 8.8%. Leveraged buyouts returned 12.6%, while venture capital returned 241.3%.1 Real estate and natural resources contributed annual returns of 9% and 14.7%, respectively.2
The 20-year annualized return for venture capital is eye-popping, but it is clarified in the footnotes.
1 Yale’s 241.3% venture capital return over the past 20 years is heavily influenced by large distributions during the Internet boom. Since such a calculation assumes reinvestment of proceeds from the portfolio during the period at the same rate of return for the rest of the period, it is inappropriate to compound the 241.3% return over the 20-year time horizon. For reference, our venture capital portfolio’s 20-year time- weighted return is 20.2%. The other illiquid asset classes are not subject to similar distortions.
Always read the footnotes.
Read more about Yale’s endowment here.
Post by Marcelino Pantoja