(Bloomberg) — Yale University’s endowment recorded a 5.7% investment return during the year ended in June, the lowest in the Ivy League except for Princeton.
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The Yale fund’s value increased to $41.4 billion, the school said in a statement Friday. The endowment contributed $2 billion to operations at the New Haven, Connecticut, university last year.
Yale’s endowment pioneered a shift away from US equities and increasing bets on alternative assets such as private equity and hedge funds. As a result, many of the richest colleges have mostly missed out on a recent stock rally, with the S&P 500 index surging 23% during the 12 months ending June 30.
“Given our significant allocation to private assets, we expect to lag during periods of strong public market performance, particularly when exit markets for private assets are depressed,” Matt Mendelsohn, Yale’s chief investment officer, said in the statement. “We remain focused on achieving investment success over the long term, knowing that doing so is likely to bring stretches of short-term underperformance.”
Yale didn’t provide a breakdown of its asset allocation in the statement.
College endowments earned a median return of 10.6% before fees during the year, according to Wilshire Trust Universe Comparison Service, which doesn’t name individual schools. Smaller funds performed better: The median return of endowments of less than $500 million was about 11%, compared with 9.1% for funds greater than $500 million, according to Wilshire.
In the eight-member Ivy League, Princeton posted the lowest return at 3.9% return while Columbia’s fund led the group with an investment gain of 11.5%. Harvard’s endowment, the largest in US higher education, returned 9.6%.
More broadly among US colleges, one of the largest gains came from Michigan State University. Its endowment returned 15% for the period, relying on strong returns from public equities.
Yale’s fund has been run by Mendelsohn since 2021. He follows the legendary David Swensen, who served 36 years as chief investment officer before his death three years ago.
The endowment’s 10-year annualized return ranked second in the Ivy League. Brown University was first.
(Updates with reference to asset allocation in fifth paragraph.)
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