Yale’s most recent filing with the Securities and Exchange Commission surprisingly reveals that the number of stocks Yale held in its own name changed only slightly since the last financial quarter.
The 13-F form — which lists all the securities Yale holds in its own name — shows that Yale divested completely from five of its securities and added small investments in four new securities between the quarters ending Sept. 30 and Dec. 31. The Feb. 12 filing is one that Yale’s Chief Investment Officer David Swensen must submit every quarter because the University holds more than $100 million in assets in its own name.
Two of the securities that disappeared from the portfolio were ones Yale listed on the 13-F form Sept. 31, but not June 30. Three other securities — Fansteel, Inc., Latin American Discovery Fund and and a Royce security — were longtime listings on Yale’s 13-Fs.
On Dec. 31, Yale held just 24 securities collectively worth $305,462,000, revealing a continuation of a pattern in which the holdings in Yale’s name have decreased significantly in the past few years. In September 2000, Yale held 76 securities worth $670,194,000 in its own name.
Although the form provides outsiders with a snapshot of some of Yale’s holdings, the filing is not representative of the many Yale investments that are directed by outside investment managers.
Many of the securities are venture capital distributions that Yale has not yet transferred or sold. Sometimes, restrictions by donors or the SEC prevent the Yale Investment Office from selling certain securities.
Because many of the holdings are not choices Yale makes, the direct effect of the sluggish economy is not the sole explanation for the decrease in listings on the 13-F. In the late 1990s, Yale received many venture capital distributions of technology companies that were going public at the time. Following the collapse of the Internet bubble, those types of securities appeared less frequently.
Yale Associate General Counsel Kenneth Miller said the form is a snapshot of all the securities Yale holds in its own name at the end of the quarter, but a few of the securities listed are ones Yale manages itself.
“Some securities are managed internally, and they might appear [on the 13-F],” Miller said.
The majority of universities — including Yale — rely on outside managers for the majority of their investments, said Larry Goldstein, a senior fellow with the National Association of College and University Business Officers.
He said universities that use investment managers rarely manage many securities directly because it may cause competition with the outside managers. But sometimes, a university might choose to manage some securities directly, he said.
“Sometimes, if they’ve got good people around, they’ll give them a pot of money and let them invest it directly,” Goldstein said.
Harvard Management Company, the manager of Harvard’s investments, is an anomaly in the investments game, holding many of its securities in its own name. HMC does not rely on outside managers in the same way that many institutions do. While Yale’s 13-F form rarely exceeds one page of listings, Harvard’s most recent 13-F form listed over 15 pages of securities.
Goldstein said while it is possible to succeed in such an investment practice, it is costly to pick individual stocks. He said it can be difficult for investments offices to attract and retain many investment managers under one roof, particularly because competing salaries for such managers are often very high.
“Absolutely, it can be done,” Goldstein said. “The question is, is it worth it to do that in today’s economy.”