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Yale University endowment

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The Yale University endowment (valued at $42.3 billion as of 2021)[1] is the world's second-largest university endowment and has a reputation as one of the best-performing investment portfolios in American higher education.[2][3] The endowment was established at Yale University, then Yale College, in 1718 from an initial fund of £562 provided by Elihu Yale and has grown to more than $40 billion in value over the ensuing 300 years.[4] It is managed by the Yale Investments Office.

History

Yale University was founded as "the Collegiate School" in 1701. In 1718, Elihu Yale sold a portion of his collection of gems and furniture to provide an initial fund of £562 for the establishment of the school's endowment.[5] From 1985 until 2021, the Chief Investment Officer of Yale was alumnus David Swensen, who was replaced by alumnus Matthew Mendelsohn.[2][3] As of 2013, the chairman of the Yale Investment Committee, which provides oversight of the endowment, was Douglas A. Warner III.[6]

Investments and performance

As of June 30, 2021, the endowment was valued at $42.3 billion.[1] Since the early 1990s, the endowment has generated annual returns for the university of approximately 11.3 percent, with a portion of the annual return forming part of the university's operating budget and the remainder reinvested to grow the size of the endowment.[7] Spending from revenue earned off the endowment accounted for $1.2 billion of the university's operating budget in 2017 and $1.5 billion in 2021.[7][1] The university aims to spend approximately 5.25 percent of the endowment on its annual operating budget.[1]

The endowment has become known for seeking out "unconventional assets" and for investments in emerging businesses.[8] In the 1990s it invested in Google and Amazon and was later an early investor in Facebook, LinkedIn, and Airbnb.[8] As of 2016, its venture capital investments had averaged 93-percent returns over the preceding two decades.[9]

Issues

In 2016 the State of Connecticut considered taxing Yale's investment returns as a way of plugging a gap in the state budget.[10] The university objected, in part, on the grounds that such a move would be a violation of the tax exemption guaranteed to the university by the Colony of Connecticut in 1745.[10][11]

Beginning in the early 2000s, some criticized the size of compensation given to the endowment's managers.[12] In 2015, Swenson earned $4.5 million, making him the highest-paid employee at the university, surpassing the compensation of even university president Peter Salovey.[12][13] Others have said the salaries of endowment managers are justifiable, asserting that they are less than what could be earned in the private sector and pay for themselves with the endowment's high rates of return.[12]

Yale's endowment has been widely criticized for its investments in fossil fuel companies, Puerto Rican debt, private prisons, companies which provide services to Immigration and Customs Enforcement, subprime mortgage lending companies, and for other controversial holdings. In December 2018, after years of criticism from campus fossil fuel divestment groups, Yale University arrested 48 student activists for staging a sit-in at the Yale Investment Office to protest Yale’s holdings in the fossil fuel industry and Puerto Rican debt.[14] That same quarter Yale sold 99 percent of its direct investment holdings in Antero Resource Corporation, a natural gas and oil company, according to Yale’s 2018 filing with the Securities and Exchange Commission.[15]

See also

References

  1. ^ a b c d "Yale endowment earns 40.2% investment return in fiscal 2021". YaleNews. 2021-10-14. Retrieved 2021-10-15.
  2. ^ a b Lorin, Janet (April 9, 2017). "Yale Endowment Blasts Low-Fee Critics, Says Gains Would Lag". Bloomberg News. Retrieved July 11, 2017.
  3. ^ a b Fabrikant, Geraldine (November 5, 2016). "The Money Management Gospel of Yale's Endowment Guru". New York Times. Retrieved July 11, 2017.
  4. ^ "A renaming question very close to home". YaleAlumniMagazine. September 2020. Retrieved October 19, 2021.
  5. ^ Agard, Katherine (2011). Leadership in Nonprofit Organizations: A Reference Handbook, Volume 1. SAGE. p. 98. ISBN 978-1412968867.
  6. ^ The Yale Endowment (PDF). Yale University. 2013.
  7. ^ a b "Investment return of 3.4% brings Yale endowment value to $25.4 billion". Yale News. September 23, 2016. Retrieved July 11, 2017.
  8. ^ a b Connington, James (April 7, 2017). "How to invest like ... Yale University's £20bn fund". The Telegraph. Retrieved July 11, 2017.
  9. ^ Pressman, Aaron (April 8, 2016). "What Yale Invested in to Almost Double Its VC Dollars Every Year". Fortune Magazine. Retrieved July 11, 2017.
  10. ^ a b Blair, Russell (March 22, 2016). "As Budget Woes Grow, Some Want To Tax Yale's Endowment". Hartford Courant. Retrieved July 11, 2017.
  11. ^ Feldman, Noah (March 30, 2016). "Tax Yale's Endowment? Good Luck With That". Bloomberg News. Retrieved July 11, 2017.
  12. ^ a b c Rodrigues, Adrian (February 6, 2014). "Yale's top earners defended". Yale Daily News. Retrieved July 11, 2017.
  13. ^ "Yale endowment chief Swensen's pay falls to $4.2 million in 2015". Pensions & Investments. May 24, 2017. Retrieved July 11, 2017.
  14. ^ Arvanitis, Lorenzo; Cho, Serena (9 December 2018). "YPD arrests 48 people at divestment sit-in". Yale Daily News. Retrieved 2019-08-13.
  15. ^ Nadel, Jesse (March 1, 2019). "Yale sells 99 percent of Antero holdings". Yale Daily News. Retrieved 2019-08-13.
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