Yale Endowment

In: Business and Management

Submitted By varunmalik
Words 439
Pages 2
1. Yale matches its five core principles of their investment philosophy to their current strategic asset allocation quite well. This is evidenced from below: -
• There is a focus on equities with only 4% of 2011 in bonds, with the residual in public or private equity.
• Equities are split into 5 fundamentally diverse asset classes, relatively high share of private equity though with share of 33%.
• There is an emphasis on less efficient markets with only 20% of 2011 targets in publicly traded equities and bonds, with the remaining in illiquid markets. Even in the public equities space, there is a higher share in less liquid foreign markets than there is in domestic.
• Yale also successfully aligned incentives with external managers. 52% of 2011 funds were in private equity / hedge funds perceivably due to strong relationships and financially involved partnerships. Only 4% were in bonds, also being the only self-managed asset class.

2. Value drivers underlying Yale’s investment philosophy can be represented via the following synergetic themes:
• Yale focuses on asset classes and markets with the belief of fundamental value creation as opposed to the arbitrage achieved by flipping stocks / securities. This strategy pushed funds into more illiquid assets, and given the higher risk spread between different market players, also inadvertently creating more opportunities for impactful investments.
• Yale placed a premium on building long-term relationships with premier external managers essentially to align their own incentives with those of the counterpartys, opening channels to invest in well-regarded specialized funds as opposed to larger financial institutions.
• Yale, like many other endowments, took a longer term view in investments, allowing them to be highly active and selective in the illiquid market assets but also to sustain long term relationships with…...

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