In the 1990s, it pioneered a strategy that has since become the preferred approach for the endowments of many of the continent’s top universities and foundations. The Yale model consists of pouring money into opportunities that aren’t as thoroughly picked over as public stock and bond markets–areas such as timberland, hedge funds and private-equity deals. In theory, this makes sense. Investors should derive a reward for taking on the additional work and risk that goes along with venturing into the dimmer corners of the financial markets. But in practice the Yale model has been inconsistent. It beat a 60/40 approach during its early years; more recently, it’s looked strictly ho-hum. In fact, over the past 10 years, the endowments for Yale and all the other Ivy League schools in the United States failed to match the performance of a standard 60/40 portfolio, according to a recent study by (MPI), an investment research and software firm. Read the full article here. (subscription required)
“With $136 billion in assets and enviable access to exclusive investment opportunities, Ivy League universities have long boasted that their endowments earn higher returns than other investors. Not anymore. This year the 10-year returns achieved by the endowments for all the Ivy League schools lagged a plain-vanilla portfolio of stocks and bonds, according to a new study by Markov Processes International, which closely monitors the performance of Ivy League endowments. It’s the first time that has happened in the 16 years for which Markov has data on all the Ivy League endowments.” Read the full article here. (subscription required)
“Despite reporting strong returns for the second straight year, Ivy League university endowments have lagged behind a simple portfolio comprised of 60% stocks and 40% bonds over the past 10 years, according to a report from Markov Processes International. The report said that from fiscal year 2009 to 2018, a portfolio made up of 60% stocks and 40% fixed income had annualized returns of 8.1%. Meanwhile not even the top-performing Ivy League endowments beat this over the same time period as Columbia University and Princeton University’s endowments were a shade behind with annualized returns of 8.0% each.” Read the full article here.
“Helped along by one of the stock market’s best runs, a humble 60/40 stock-bond portfolio built from low-cost index funds would have outperformed all Ivy endowments for the past 10 years through July, according to the new report by investment researcher Markov Processes International.” Read the full article here.
“Ivy League endowments continued their strong performance in fiscal 2018 (ended June 30), with all but one registering double-digit returns and all beating a 60–40 U.S. stocks-and-bonds portfolio, the research and analytics firm Markov Processes International reported last week. However, for the first time in the 20 years of available Ivy endowment returns data, the 60–40 portfolio outpaced all Ivies in terms of 10-year performance. For 15- and 20-year performance, the Ivies still maintained an edge on the benchmark.” Read the full article here.
“There’s a tug of war going on in endowments, as well as in asset management,” said Jeff Schwartz, president of MPI. “A lot of people are hoping that there is no point in investing in these complex alternatives. Then you have devotees of the Yale model who want to show there is a payoff for putting so much of the portfolio into private equity, VC, and all the things we think of as sophisticated and expensive. This report shows that the reality is much more complex than either narrative.” Read the full article here.
“The Duke Endowment’s 2018 returns also beat the 8.4 percent gains that a typical 60-40 portfolio of S&P 500 stocks and aggregate bond index investment grade bonds would have returned in fiscal year 2018, according to Markov Processes International. The endowment’s growth also surpassed the S&P 500’s 10.8 percent growth over the same period.” Read the full article here.
“This year’s gains were driven by alternative investment strategies. Ivy League asset managers have been ramping up allocations to alternative asset classes in recent years in hopes of outperforming broad market indexes. “What we definitely see is that the funds that were highly exposed to private equity and venture capital did very well,” said Jeff Schwartz, president at MPI.” Read the full article here.
“According to investment research analysts Markov Processes International, the strong performance has been driven in large part by investments in private equity and venture capital, which have returned 18.7% and 18.3%, respectively, in fiscal 2018, compared to a 14.4% return for the S&P 500…. Markov estimated that private equity and venture capital contributed 8.3% and 3.3% of Yale’s 12.3% return for 2018, with other asset classes contributing only 0.8% of its annual return. The firm also estimated that private equity and venture capital contributed 5.2% and 3.2%, respectively, of Dartmouth’s 12.2% return; and 3.6% and 3.3%, respectively, of Harvard’s 10% return.” Read the full article here.
“Harvard’s returns topped the 8.4 percent gain that a typical 60-40 portfolio of Standard & Poor’s 500-stock and aggregate bond index equities would have delivered over the same period, said Jeff Schwartz, president of Markov Processes International, a quantitative research and technology firm. But the endowment at the Massachusetts Institute of Technology, for example, posted a 13.5 percent gain, bringing it to $16.4 billion; Notre Dame’s increased 12.2 percent, to $13.1 billion; and the University of Pennsylvania’s rose 12.9 percent, to $13.8 billion.” Read the full article here. (subscription required)