Yale Daily News – The days may be numbered on the rocketing growth of Yale’s endowment.
The University’s investment portfolio – valued at $15.2 billion in June of 2005 – grew 22.9 percent to $18 billion this year, marking the second straight year Chief Investment Officer David Swensen and his team have posted returns above 20 percent. In the last decade, the endowment has averaged over 17 percent yearly returns, growing by $13 billion. But while the University’s investment team may continue performing above average, experts and administrators said they do not expect such steep growth to continue.
“One would never prudently count on returns of this magnitude,” Yale President Richard Levin said in an e-mail Wednesday night.
Unlike many other universities with large endowments, such as Harvard and Stanford universities, Yale leaves most of the hands-on investing to external managers. Swensen has been hailed as a pioneer of this method, reducing risk and maximizing returns by using sophisticated strategies to choose managers. One of the most significant portions of the endowment is entrusted to hedge funds – lightly-regulated portfolios catering to sophisticated investors – which have been a source of much of the endowment’s success over the last 16 years.
But hedge fund experts warn that they cannot be profitable forever.
