New Haven, Conn.—Yale’s endowment earned a 3.4% investment return for the year ending June 30, 2016. The endowment value declined from $25.6 billion on June 30, 2015, to $25.4 billion on June 30, 2016, net of spending that supports faculty salaries, student scholarships, and other expenses.
Spending from the endowment, which is the largest source of revenue for the University, for Yale’s 2017 fiscal year is projected to be $1.2 billion, representing approximately 34% of the University’s net revenues. Endowment distributions to the operating budget have nearly doubled in the last decade, with an annualized increase in endowment spending of 5.9%. Those distributions support, among other priorities, Yale’s commitment to meeting the full financial need of every student enrolled in Yale College.
The University’s longer term results remain in the top tier of institutional investors. Yale’s endowment returned 8.1% per annum over the ten years ending June 30, 2016, surpassing broad market results for domestic stocks, which returned 7.5% annually, and for domestic bonds, which returned 5.1% annually. Relative to the estimated 5.1% average return of college and university endowments, over the past decade Yale’s investment performance added $7.1 billion of value in the form of increased spending and enhanced endowment value. During the ten-year period, the endowment grew from $18.0 billion to $25.4 billion.
Over the past two decades, Yale’s endowment generated returns of 12.6% per annum. Compared to the estimated 7.5% average return of college and university endowments, Yale’s investment performance added $22.1 billion of incremental value. During the 20-year period, the endowment grew from $4.9 billion to $25.4 billion, net of spending.
Long-Term Asset Class Performance
Yale’s ten-year asset class performance remains strong. Domestic equities returned 10.5%, besting the benchmark by 3.0% annually. Foreign equities produced returns of 13.7%, surpassing the composite benchmark by 9.5% annually. Absolute return produced an annualized return of 5.9%. Leveraged buyouts returned 11.2%, while venture capital returned 15.9%. Real estate and natural resources contributed annual returns of 4.9% and 6.1%, respectively.
Yale continues to maintain a well-diversified, equity-oriented portfolio, with the following asset allocation targets for fiscal 2017:
Absolute Return: 22.5%
Venture Capital: 16.0%
Foreign Equity: 15.0%
Leveraged Buyouts: 15.0%
Real Estate: 12.5%
Bonds and Cash: 7.5%
Natural Resources: 7.5%
Domestic Equity: 4.0%
Yale targets a minimum allocation of 30% of the endowment to non-correlated assets (cash, bonds and absolute return). The University further seeks to limit illiquid assets (venture capital, leveraged buyouts, real estate and natural resources) to 50% of the portfolio.
Yale’s spending and investment policies provide substantial levels of cash flow to the operating budget for current scholars, while preserving endowment purchasing power for future generations. Approximately a quarter of spending from the endowment is specified by donors to support professorships and teaching. Nearly a fifth is dedicated to scholarships, fellowships and prizes. A quarter is available for general University purposes. The remaining endowment funds are donor-designated to support specific departments or programs.
Led by Chief Investment Officer David F. Swensen and operating under the guidance of Yale's Investment Committee, the Investments Office manages Yale's Endowment.