Tim Tai, Staff Photographer

In the final months of 2021, the Yale endowment added two financial technology companies and a natural gas company to its portfolio while significantly decreasing its holdings in EQT Corporation, an American energy company, according to its latest SEC filing.

In one of the biggest moves of the quarter, Yale decreased its holdings in EQT Corporation, an energy company that focuses on hydrocarbon exploration and pipeline transport. The total value of the University’s holdings in EQT Corporation dropped from $263 million to $70 million, marking a 73 percent decrease. At the same time, however, Yale also acquired shares totalling $41 million in Antero Resources Corporation, a natural gas and oil company whose ties to Yale have drawn criticism from climate justice groups Fossil Free Yale and the Endowment Justice Coalition in the past. 

The changes were reported in Yale’s latest SEC filing. Every quarter, the Securities and Exchange Commission requires institutional investment managers that manage over $100 million to disclose qualifying public security holdings via Form 13F. Yale is not required to report securities for which it holds fewer than 10,000 shares and less than $200,000 in aggregate fair market value. The fourth quarter ended on Dec. 31, and Yale filed the report on Feb. 14, although the filing contains a disclaimer from the SEC that “the reader should not assume that the information is accurate and complete.” University officials declined a request for comment about the filing, citing University policy not to comment on investments. 

“Energy stocks have been among the best-performing stocks over the past year,” John Longo, a professor at Rutgers University, wrote in an email to the News. “In an inflationary environment, commodities typically perform well.”

Oil and natural gas are among the most common commodities. Commodity prices have risen recently and are also much more volatile due to uncertainty regarding sanctions on Russia, according to James Huang SOM ’22 and Gurkamal Pannu SOM ’24, who lead the investment research newsletters for the Yale School of Management’s Investment Management Club. This makes the trade-off for direct investments in commodities less favorable, they said. Huang and Pannu are not affiliated with the Yale Investments Office.

Longo added that fixed income investments — which include United States Treasury bonds — are becoming “less attractive” because the bond yields risk underperforming inflation. The latest Consumer Price Index reflected 7.5 percent inflation over the past year. To counter this inflation, the Federal Reserve typically exercises contractionary monetary policy and raises interest rates. Longo said that when interest rates are rising, “value stocks” from established companies with strong cash flows tend to perform especially well.

In addition to Antero, two financial technology companies were added to the portfolio: Docusign and Flywire. Yale acquired shares worth $5.7 million of Docusign, an e-signature company, and $6.2 million worth of Flywire Corporation, a company that focuses on e-payments.

“The financial payment systems of the world are being rewired with the help of financial technology firms,” Longo wrote. “The pandemic has accelerated this shift with firms, such as DocuSign, PayPal and Block leading the charge. These e-payment firms offer a fast and convenient way to send money and engage in transactions, especially remotely, so they are likely to continue to grow.”

The report also revealed that Yale no longer holds shares of Pubmatic Inc., Amplitude Inc., Illumina Inc., Warby Parker Inc. and Stitch Fix Inc, which were previously in the portfolio according to the third quarter report. Furthermore, between the third-quarter filing and the fourth-quarter filing, Yale’s holdings in the Vanguard FTSE Emerging Markets ETF and Vanguard FTSE Europe ETF decreased by $91 million and $20 million, respectively. Unlike stocks issued by corporations, index funds are portfolios of securities that are designed to follow the growth of a specific financial market index.

According to the 2020 Yale endowment report — the latest year with data available — the Yale Investments Office allocates 2.3 percent of the endowment to domestic equities, which are securities that are publicly traded on the U.S. stock market. The report furthers that Yale’s domestic equity portfolio has posted returns of 9.7 percent per year over the past 20 years. In comparison, the S&P 500 return for the same time period was 7.45 percent, or 5.3 percent when adjusted for inflation.

In a previous interview with the News, Sarah Reed, general counsel at RA Capital Management, explained that endowments have the ability to allocate greater percentages of their portfolio to more illiquid asset classes, such as private equity and venture capital.

“Anybody who is managing an endowment wants to allocate some part of their endowment to very high risk, potentially high return, investments, that’s just part of good portfolio management,” Reed said. “And also, the longer your time horizon is, the more you can allocate to those illiquid asset classes.”

Endowment expert Charles Skorina similarly added that, in an attempt to outperform public markets, endowments may choose to invest more in private equity and venture capital, which are more illiquid and can yield higher returns.

In 2020, 22.6 percent of Yale’s endowment was invested into venture capital and 15.8 percent was invested into leveraged buyouts.

ALEX YE
Alex Ye covers endowment, finance and donations. Originally from Cincinnati, Ohio, he is a first year in Timothy Dwight majoring in computer science and mathematics.