Though well below its 20 percent return for fiscal 2014, the Yale endowment’s 11.5 percent performance in 2015 has once again placed it among the top tier of institutional investors.

On Thursday, the University announced that the Yale Investments Office had beaten market estimates to post a return of 11.5 percent, bringing Yale’s 20-year performance to 13.7 percent per annum. Over the past fiscal year, which ended on June 30, the Yale endowment grew from $23.9 billion to $25.6 billion, bringing its value to a nominal high, crossing the $25 billion threshold for the first time in its history. As a result of this performance, the University benefited from investment gains of approximately $2.6 billion — funds that are used in part to provide substantial support for current scholars, while also “preserving the endowment’s purchasing power for future generations,” according to Thursday’s press release.

“This is an excellent return. In a very, very tough environment that we have had, Yale has consistently produced excellent numbers, which validates their strategy,” said Charles Skorina, founder of Charles A. Skorina & Co., a recruiting firm for university endowments. “[Chief Investment Officer] David Swensen’s objectives are to build relationships with a small group of top money managers, and keep the focus on a few as opposed to the many … the man has delivered and continues to deliver.”

Swensen declined to comment.

Yale’s investment returns for 2015 bested many of its peer institutions, including the two universities with assets greater than Yale’s. Harvard, whose endowment now stands at $37.6 billion, saw a 5.8 percent return. The University of Texas system, which holds $26.6 billion in assets, reported a weighted 3.5 percent return for its two funds.

According to William Jarvis ’77, managing director of the Commonfund Institute, among endowment returns publicly released, Yale has posted the third highest rate — surpassed only by Bowdoin College, which produced a 14.4 percent return for its $1.4 billion endowment, and the Massachusetts Institute of Technology, which saw a 13.2 percent return on its $13.5 billion endowment.

Other schools, such as Princeton, have yet to release their numbers as of Thursday evening.

Yale’s performance also handily beat many of the industry averages released, including the 3.6 percent median return for endowments with more than $500 million in value, according to an estimate by the Wilshire Trust Universe Comparison Service. The 11.5 percent return also outpaced the preliminary 5.6 percent average return for endowments over $3 billion, which was reported by Cambridge Associates, a leading investment advisor to foundations and endowments.

Still, Jarvis stressed that rather than simply focus on the year-to-year “returns derby,” it is more important to consider Yale’s endowment growth over time.

“There are two pieces here that are important. One is, yes, this is a nice high investment return,” Jarvis said. “The second, though, is that Yale’s combination of asset allocation decisions and manager access enables it to make a claim about having lower volatility of returns over time, which facilitates this compounding that leads to wealth building.”

According to the Yale Investments Office release, over the past decade, the endowment has grown from $15.2 billion to $25.6 billion. Over the long term, many of Yale’s asset classes beat their industry benchmarks. Over the last 10 years, for instance, domestic equities returned 12.3 percent, beating the benchmark by 4.1 percent annually. Foreign equities had returns of 17.4 percent, outpacing the benchmark by 8.4 percent annually. Real estate, which accounts for 13 percent of Yale’s portfolio for fiscal 2016, returned 6.2 percent and natural resources, which make up 8.5 percent of the portfolio, posted returns of 10.5 percent.

The top performing asset class listed, however, was venture capital, which returned 18 percent over the last decade — nudging out the returns on foreign equities and accounting for 14 percent of the Yale portfolio, the report stated.

Revenue from the endowment provides a critical resources for the University and for the 2016 fiscal year, spending from the endowment is projected to be $1.2 billion, accounting for more than a third of the University’s net revenues. This endowment distribution has nearly doubled in the past decade and is used for such priorities as “meeting full financial need of every student enrolled in Yale College,” Thursday’s release stated.

Still, the future of returns for the 2016 fiscal year are far from certain.

Given the recent fluctuations in global markets — coupled with the uncertainty in the behavior of the Federal Reserve — Jarvis warned that endowments may face some difficulties in the coming year.

“Although fiscal 2015 was in many ways a challenging year, the June 30 line was drawn before the volatility in the recent few months, so the challenges remain coming into 2016,” Jarvis said. “And I think it is fair to say that all portfolios and chief investment officers are going to have their assumptions tested in the fiscal year that we currently are in now.”

Correction, Sept. 25: Due to an editing error, a previous version of this article incorrectly stated that Stanford was yet to release their endowment performance for the 2015 fiscal year. In fact, Stanford released its endowment performance on Sept. 22.

  • rick131

    Stanford increased 7% to 22.2 billion.

  • Hieronymus Machine

    Screw “The Game” (where ‘twould seem we never catch a break), we’re *crushing* in the REAL world: 20 to 10 since 1985. What does that mean? It means the H/Y endowment ratio has gone from ~4:1 to <1.5:1… Go Team Swensen!

    (If you like percentages, 30 years ago Handsome Dan had 25% the, uh, "endowment" of the Cantab; today he's closing in on 70% thereto; now THAT'S what incremental outperformance gets you over the long term!)

    When the Swensen wrote his first book on investment strategy, Harvard's Jack Meyer contributed this line to the book jacket: “We at Harvard wish that David Swensen would find a new job.” Truer words…

  • wondering

    Would the Provost’s Office please stop insisting on Austerity Measures in this time of terrible budget shortfall for Yale? With resources like this, someone is not managing the budget effectively if we need to keep cutting back on expenses for educational purposes, the central mission of the University after all.
    The cognitive dissonance of this combination is becoming too much to bear. Alumni, please weigh in!

    • Hieronymus Machine

      Compare labor costs of, e.g., Yale versus Harvard (esp. considering relative sizes of the affected workforces), and then perhaps rethink “the central mission of the University after all.”

      Also, budget deficits, endowment performance and spending rules do not always move in sync (indeed, given their persistence over time and their lagging inputs, it would be rare for them to do so).

      Yale still has a lot to swallow: two new colleges + the Bayer campus (plus the billions spent on campus restoration and town/gown relations over the past decade). Frankly, I think Yale is progressing swimmingly, most especially vis-a-vis its rivals (financially speaking, anyway; its social progressivism is a different topic).

    • Hieronymus Machine
  • dmelakada

    Stanford did not “increase” by 7%. It had investment gains of 7%, but its endowment increased by only 3.6%.

    • rick131

      Or even less than that. Stanford went from 22.1 billion to 22.2 billion. The problem is some schools are reporting return on investments, some are reporting percentage increase in endowments. And some are subtracting management fees (Yale), and some are not (Harvard, Stanford).