Should Yale investments be more ‘defensive?’ Maybe yes, according to billionaire Howard Marks, the former chairman of the University of Pennsylvania’s endowment fund and chairman of Oaktree Capital. Marks wrote an Oct. 20 letter to Penn trustees explaining how Penn outperformed many Ivy Schools in endowment returns for the past two fiscal years, Bloomberg reported.

Marks said Penn owned a “defensive” selection of hedge funds, significant cash and short-term U.S. Treasuries, and had less holdings in property and private equity — helping the school to avoid losses as large as those at peer institutions in the financial crisis of 2008-’09. Yale’s Chief Investment Officer David Swensen GRD ’80 pioneered a model of investing in alternative assets such as real estate, private equity, timber and gas.

Penn also relies less on its endowment than many Ivy League institutions, Marks said, deriving 10 percent of its budget from endowment income, which makes up more than 30 percent of Yale’s and Harvard’s budgets.

Yale’s endowment plunged 24.6 percent in the fiscal year that closed June 2009, Harvard’s dropped 25 percent and Penn saw only a 16 percent decline. Penn’s endowment returned 13 percent for the fiscal year ending June 30, beating both Yale’s 8.9 percent and Harvard’s 11 percent returns.

[via Business Insider]