Harvard and Yale Endowments

"Ever wonder why fund managers can't beat the S&P 500? 'Cause they're sheep. And sheep get slaughtered."
--Gordon Gekko (Wall Street)

Because fiscal years for university endowments often end in the summer (consistent with the academic calendar), year end results are just now making their way to the news. Two of the largest endowments are Harvard ($35.7 billion) and Yale ($25.4 billion).

This year, Yale reported a 3.4% annual gain vs Harvard's -2% performance. This marks the sixth straight year that Yale has outperformed Harvard. It also marks Harvard's worst annual performance since 2009. Both schools outperformed the average school endowment which reported a -2.7% net return.

Although both schools were among the first to add alternative investments to their portfolios, they manage their funds in different ways. Yale, managed by veteran David Swensen, outsources most individual investment decisions to dozens of investment managers. This is similar to individual investors who invest in plethoras of mutual funds. Those individuals put their faith in the investment prowess of the money managers in charge of those mutual funds.

Harvard, on the other hand, has relied on the 'old fashioned' approach of managing some of its assets in-house. It is also searching for a new chief executive for the endowment.

Also interesting was Yale's forecast parameters for 2017 asset allocations. Private equity and venture capital will might comprise up to 53.5% of the portfolio. Domestic stocks won't be higher than 4%, and cash and bonds won't exceed 7.5%.

It appears that David Swensen's well known 'equity bias' is still manifest in Yale's asset allocation.