Yale selects Matthew Mendelsohn ’07 to lead its Investments Office
Mendelsohn will succeed David Swensen GRD ’80, who had served as Mendelsohn’s mentor since 2007.
Dan Renzetti / Yale News
After an international search, Matthew Mendelsohn ’07 will succeed David Swensen Ph.D ’80 as Chief Investment Officer and steward the second-largest university endowment in the nation.
Mendelsohn joined the Investments Office in 2007 as one of Swensen’s protégés. He most recently oversaw Yale’s venture capital investments, which comprise more than a quarter of the endowment.
The University began the search for Swensen’s successor in May, when the pioneering investor died after a nine-year battle with cancer. A seven-member search committee conducted an international search before ultimately deciding on an internal candidate. Mendelsohn will assume the helm of Yale’s endowment on Sept. 1.
“With Matt, it boils down to his having a rare combination of qualities: extremely high talent, a superb work ethic, impeccable ethics, deep experience in the Yale Investments Office, a natural ability to lead, and strong personal ties to Yale dating back to his undergraduate days,” University President Peter Salovey wrote in an email to the News.
Under Mendelsohn’s leadership, Yale’s venture capital portfolio has returned an annual average of 21.6 percent over the past decade, far above the S&P 500 and relevant private equity benchmarks. He also helped manage Yale’s domestic and foreign equities, absolute return and natural resources asset classes, Salovey wrote in an email to the Yale community. Under Swensen, Mendelsohn worked with Yale’s external managers. He also co-taught an endowment management course at Yale’s School of Management from 2013 to 2018.
As head of the endowment, Mendelsohn will have to respond to calls for more ethical investments and greater diversity within the endowment management industry. In October 2020, Swensen wrote a letter demanding that managers hire more diverse employees and claiming that Yale would do the same. In April, the University unveiled new standards for divesting from fossil fuel companies. Mendelsohn affirmed his commitment to the principles Swensen put forward, stating that the office “need[s] to do better ourselves” as well as seek diversity among its investment partners. The best ideas emerge from a “diversity of opinions, perspectives and lived experiences,” he told the News.
“Though we will evolve to face new challenges, the future will no doubt rhyme with the past as we build off of a strong foundation,” Mendelsohn wrote in a statement. “Looking ahead, we will build on the office’s longstanding allegiance to ethical investment practices and develop a diverse team of internal and external investment managers as we seek to continue Yale’s legacy of investment success.”
Swensen came to Yale in 1985, when the University had a $1 billion endowment. Over the next few decades, he diversified the portfolio — embracing venture capital and private equity — and grew the endowment to its most recent reported value: $31.2 billion as of June 2020. Mendelsohn told the News that the chief lesson he would take from Swensen’s tutelage is that investing “is all about people” — that aligning with strong partners and treating them with respect will produce good results.
“Matt has the qualities you would expect of someone mentored by David Swensen,” Benjamin Polak, economics professor and chair of the search committee, wrote in an email to the News. “That starts with integrity and a dedication to the mission of Yale. Like David, Matt is analytically rigorous and disciplined. Like David, Matt approaches each investment opportunity from first principles, and he is a great judge of character. Like David, Matt has a clear moral compass. Like David, Matt is a team builder and a mentor, an investor and a leader.”
After Swensen’s death in May, the University appointed a committee to search for his successor. Alex Banker GRD ’80, a director at the YIO, served as the interim Chief Investment Officer for the search’s duration.
Along with Polak, five current and former members of the Yale Corporation Investment Committee, which oversees the endowment, and one SOM professor made up the other search committee members. The committee worked in conjunction with David Barrett Partners, an executive search firm.
Salovey gave the committee the option of putting forward a slate of candidates or making a clear recommendation, he said in a June interview with the News. The committee ultimately chose to recommend Mendelsohn as its sole candidate, Salovey said. The Yale Corporation then voted to approve Mendelsohn for the role.
Swensen had met Mendelsohn at a Berkeley Fellows event, when the latter was a senior in Yale College, and hired him after graduation. Prior to Swensen’s death, the famed investor shared opinions on investors in the industry and people within his own team with Yale’s Investment Committee, Salovey explained. Mendelsohn was one of a few internal candidates that Swensen identified as a potential successor, the Wall Street Journal reported.
But Salovey said that Swensen’s comments did not comprise a concrete list of potential successors. Swensen shared people that he admired, but never “pointed to someone” and suggested them, Salovey said. Swensen also shared the progression of his illness with the Investment Committee, and how to triage in the event of an emergency medical situation.
Charles Skorina, who runs a recruiting firm for chief investment officers, said that Mendelsohn is an “obvious choice.”
“It screams out at you,” Skorina told the News. “He’s the right age, he’s working in the right area — private equity and venture capital, they’re premier areas — he has plenty of time. He’s well-liked … So culture, institutional memory, tradition, degrees, experience, age, it all fits.”
Charley Ellis ’59, former Investment Committee chair and close friend of Swensen’s, explained that venture capital requires “disciplined thinking,” and that Swensen would not have given someone responsibility for venture capital investments unless they were “really good at the kind of disciplined thinking that was the center of the Yale investments program.”
Mendelsohn’s next challenge is to determine how long the “Yale model” for investment will continue to be the best, Skorina said, adding that investments in venture capital and private equity will continue to generate better long-term returns than those in public markets do. But investors need a system to decide which managers to invest with and they need access to the best managers; it is unclear exactly how Yale will fare without Swensen, Skorina added.
But investors are generally obligated to keep their money in venture capital or private equity for between five and 10 years, Skorina said. The makeup of Yale’s endowment is therefore unlikely to drastically change in the coming years, even under new leadership, he added.
Both Salovey and Ellis explained that Swensen was guided firstly by risk management, and secondly by return achievement — meaning that he was willing to slightly diminish returns to gain greater security for investments, Salovey explained. Ellis analogized risk management to someone competing in the Indianapolis 500.
“Finishing first is the second-most important,” Ellis said. “Finishing is more important. Anytime you’re in a difficult, complicated, fast-changing and particularly dangerous place, risk management is really important.”
Like Swensen, Mendelsohn hails from the Midwest.