Americans know that some colleges have a lot more money than others. But all of this money requires management, complicated management. According to an article by Gillian Wee in Businessweek, Yale, which has a total endowment of $19.4 billion, has been making some interesting new investment decisions. Wee:
Yale University, whose endowment strategy has been a model for U.S. schools, bought new shares of a China exchange-traded fund last quarter.
The stake, valued at $23.2 million as of Dec. 31, was Yale’s biggest new purchase during the three months, according to a filing today with the U.S. Securities and Exchange Commission. Its second-biggest new purchase was a $382,255 holding in Zipcar Inc., the U.S. car-sharing service based in Cambridge, Massachusetts, that completed an initial public offering last year.
Yale’s endowment resulted in a 22 percent return last year.
David Swensen, who has been the chief investment officer at Yale since 1985, initiated a new, aggressive investment strategy (called the Endowment Model) based on broad diversification and avoiding asset categories with low returns.
Back in May, 2010, a paper by the Tellus Institute criticized the Endowment Model for exposing university budgets to unnecessary risk. The Endowment Makes a lot money over the long term, but it also exposes academic institutions to dangerous market fluctuations, causing them to lay off staff and severally hurt local economies.