Yale to increase PE allocation despite difficult 2009
Yale University has decided to increase its allocation to private equity, despite the asset class hurting the endowment’s balance sheet last year.
Due to its expectation that private equity is on course to perform well, with attractive opportunities offered through inefficient valuations, Yale is increasing its allocation from 21 per cent to 26 per cent, as outlined in its annual report, released yesterday.
This is in spite of the 24.3 per cent loss made by the endowment on leveraged buy-out and venture capital funds in 2009.
The report said, “The heavy allocation to non-traditional asset classes stems from their return potential and diversifying power. Today’s actual and target portfolios have significantly higher expected returns and lower volatility than the 1989 portfolio. Alternative assets, by their very nature, tend to be less efficiently priced than traditional marketable securities, providing an opportunity to exploit market inefficiencies through active management.”
The university endowment, said to be the second richest after Harvard and the best performing in the US, took a battering in 2009. Its overall value plummeted to $16.33bn, a massive drop of 24.6 per cent on 2008.
Aside from the difficulties of last year, private equity earned Yale 25.8 per cent annually over the last ten years, outperforming the return of a benchmark pool of private equity managers compiled by Cambridge Associates by 15.4 per cent per year. Since inception in 1973, the private equity programme has earned it a return of 30.4 per cent per annum.
Read the full report
This is in spite of the 24.3 per cent loss made by the endowment on leveraged buy-out and venture capital funds in 2009.
The report said, “The heavy allocation to non-traditional asset classes stems from their return potential and diversifying power. Today’s actual and target portfolios have significantly higher expected returns and lower volatility than the 1989 portfolio. Alternative assets, by their very nature, tend to be less efficiently priced than traditional marketable securities, providing an opportunity to exploit market inefficiencies through active management.”
The university endowment, said to be the second richest after Harvard and the best performing in the US, took a battering in 2009. Its overall value plummeted to $16.33bn, a massive drop of 24.6 per cent on 2008.
Aside from the difficulties of last year, private equity earned Yale 25.8 per cent annually over the last ten years, outperforming the return of a benchmark pool of private equity managers compiled by Cambridge Associates by 15.4 per cent per year. Since inception in 1973, the private equity programme has earned it a return of 30.4 per cent per annum.
Read the full report
Copyright © 2010 AltAssets
Article is in the following categories:
Private Equity News» By News Type» Firm News
Private Equity News» By PE Sector» Buy-out
Private Equity News» By Region» North America» United States
Private Equity News» By News Type» Firm News
Private Equity News» By PE Sector» Buy-out
Private Equity News» By Region» North America» United States
