Yale Follows Harvard with Deep Endowment Losses

September 23, 2009 (PLANSPONSOR.com) - Yale University announced its endowment lost 24.6% in the fiscal year ended June 30, when big bets on private equity holdings, real estate, and commodities soured.

Reuters reported the endowment’s value fell to $16.3 billion based on investment losses of $5.6 billion, operating budget distributions of $1.2 billion, and gifts and other adjustments of $200 million, the university’s Investments Office said. The endowment was valued at $22.9 billion on June 30, 2008.

The Ivy League school said real assets, its largest asset class, declined 33.9% while private equity holdings in leveraged buyouts and venture capital lost 24.3% and energy investments tumbled 47.4%.

In fiscal year ended June 30, however, alternative assets hurt endowments more than they helped, and traditional investments in bonds delivered the best returns, Reuters reported.

Yale’s holdings of U.S. Treasury bonds returned 5.1%, but the school allocated only 4% of its portfolio to fixed-income securities.

Harvard, whose endowment also relied heavily on alternative assets, said recently the value of its endowment’s investments fell 27.3% last year (see  Harvard Endowment Slammed with $11B FY Loss ). Harvard said it would alter its strategy to become slightly less risky.

In total, the Yale portfolio returned 28% in fiscal 2007 and 41% in fiscal 2000. Over the last decade, the endowment returned an annualized 11.8 %, far exceeding more traditional investments’ returns.