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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]Heard an interview today with Bill Ackman, hedge fund manager, alum, and donor.

Harvard’s headline endowment is $53 billion, but 75% of that is in private investments, like private equity and venture capital, that aren’t regularly marked to market value and are not liquid. He estimated that market value is 30-40% lower than stated. Further, Harvard has $8 billion of debt. Apparently, the day-to-day operation of the overall enterprise is heavily dependent on government money and annual donations.

This reminds me that UChicago is in even worse shape.

How do these great schools with so many great minds mess this all up?[/quote]
It is ridiculous that an endowment should invest 75% in private equity and VC. You would think that they should be forced to ensure stability with only a small portion with higher risk. Just shows that they don't actually have great minds. The minds there are mainly living off reflected glory.

It also could mean there is a greater rot in there that is being hidden and these private high risk high return investments are a hail mary to recover from deeper losses.[/quote]

It’s not 75% in private equity and VC though. It’s 39% in private equity. There are some other things that are less liquid than pure public equities (hedge funds 32%, real estate 5%, other real assets 3%), but all of these can be exited with a bit of time and they are generally uncorrelated with each other.

Most of the claims on this thread of mismanagement or huge capital commitments are unfounded. They are exiting private equity for the same reason everyone is — the outperformance has shrunk and the war on universities means they may need access to funds sooner than planned. Harvard’s endowment distribution as a share of the university’s operating budget has nearly doubled in the past 20 years to almost 40% of the budget.[/quote]

And here is Yale’s, which is hardly the panic and mismanagement people here are making it out to be:

———

The fund contributes more than a third to Yale’s annual operating budget, last year providing $2 billion. But with the markets for initial public offerings and mergers softening, private equity firms’ distributions as a percentage of net asset value have fallen to 11% from an average of 29% between 2014 to 2017 while global buyout assets have tripled, according to consulting firm Bain & Co. On its earnings call last week, Blackstone Inc. warned that policy-driven uncertainty and market volatility would only worsen this exit drought.

This tension between long-term strategy and near-term needs poses a delicate balance. In October 2023, Swensen’s successor as Yale’s chief investment officer, Matt Mendelsohn, affirmed the endowment’s commitment to illiquid investments, noting that its “ability to be patient with long-term, illiquid assets will continue to be one of Yale’s key competitive advantages.”

While the strategy has worked well to date – the endowment returned 10.3% per year during the 20 years ending June 30, 2024 – market conditions are shifting. As Mendelsohn noted, “success over the next four decades will look different than success over the last four” – and the allure of private equity may be fading. Bain & Co. noted that while buyout funds still outperform public markets over longer periods, that edge is eroding. With competition keeping acquisition prices high and debt costs elevated, generating alpha has become increasingly difficult.

Dumping $6 billion of private equity would be a seismic move. Last year, endowments and foundations combined sold just under $9 billion in the secondary market, according to Yale’s adviser, Evercore Inc. And Yale would have to take a hit: In 2024, the average discount for buyout portfolios was 10% to net asset value, although some recent transactions were done narrower.

But if the sale is completed, it could prove prescient in the event of continued market deterioration. In early 2009, Swensen identified “extraordinary opportunities” in distressed credit. If Mendelsohn can stomach the discount now, freeing up billions in dry powder could position Yale to capitalize on similar opportunities ahead.

https://www.bloomberg.com/opinion/articles/2025-04-23/yale-s-endowment-have-we-reached-peak-private-equity

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