Yale Endowment earns 4.7% investment return

Yale’s endowment earned a 4.7% investment return for the year ending June 30, 2012. The endowment value fell modestly from $19.4 billion on June 30, 2011, to $19.3 billion on June 30, 2012. The University benefited from investment gains of nearly $900 million and spending distributions of approximately $1,000 million.

The Endowment produced positive performance during fiscal 2012 in the context of a difficult investment environment. Domestic equities, as measured by the Wilshire 5000 Index, returned 3.8% over the year. Foreign markets struggled amid great uncertainty, with developed markets losing 13.8%, and emerging markets dropping 15.9%.

Spending from the endowment for Yale’s 2013 fiscal year is budgeted at $1,025 million, representing approximately 36% of the University’s net revenues. Endowment distributions to the operating budget have more than doubled in the last decade.

“Thanks to the outstanding work of the Investments Office, Yale has derived maximum benefit from the generosity of its donors during challenging economic times," said President Richard C. Levin. “Furthermore, our successful investment record over the last two decades has helped the University achieve ambitious goals that have greatly enhanced our ability to provide superb education for our students.”

The University’s longer-term results remain in the top tier of institutional investors.  Yale’s endowment returned 10.6% per annum over the 10 years ending June 30, 2012, surpassing results for domestic stocks, which returned 6.2% annually, and for domestic bonds, which returned 5.6% annually. Relative to the estimated 6.8% average return of college and university endowments, over the past decade Yale’s investment performance added $7.2 billion of value in the form of increased spending and enhanced endowment value. During the 10-year period, the endowment grew from $10.5 billion to $19.3 billion.

Over the past two decades, Yale’s endowment generated returns of 13.7% per annum.  Compared to the estimated 8.7% average return of college and university endowments, Yale’s investment performance added $16.7 billion of incremental value. During the 20-year period, the endowment grew from $2.8 billion to $19.3 billion.

Long-term asset class performance

Yale’s 10-year asset class performance remains strong. Domestic equities returned 9.8%, besting the benchmark by 3.6% annually. Foreign equities produced returns of 16.6%, surpassing the composite benchmark by 6.5% annually. Absolute return produced an annualized return of 10.0%, while private equity returned 13.2%. Real estate and natural resources contributed annual returns of 7.3% and 16.2%, respectively.

Asset allocation

Yale continues to maintain a well-diversified, equity-oriented portfolio, with the following asset allocation targets for fiscal 2013:

 

Private Equity:            35%

Real Estate:                22%

Absolute Return:         18%

Foreign Equity:             8%

Natural Resources:        7%

Domestic Equity:           6%

Bonds and Cash:           4%