Here's How Yale Is Crushing Harvard In Endowment Performance

Harvard University Crimson Yale Bulldogs Football StudentsAl Bello/Getty ImagesYale hasn’t beaten Harvard in football since 2006, but its endowment has outperformed Harvard’s over the last 20 years.

Yale’s endowment keeps outperforming Harvard’s.

On Wednesday, Yale announced that in the fiscal year ended June 30, the university’s endowment earned a 20.2% investment return, topping the 15.4% returned by Harvard’s endowment over the same period.

Last year, Yale’s endowment grew to $US23.9 billion from $US20.8 billion, still significantly smaller than Harvard’s endowment of $US36.4 billion as of June 30.

Looking at the past performance of these endowments, however, 2013’s outperformance by Yale wasn’t unique.

Over the most recent 10- and 20-year periods, Yale has outperformed Harvard, and not by a meaningless amount.

Yale’s investment return over the last 10 years stands at 11% against Harvard’s 8.9% return. Over 20 years, Yale has returned 13.9% per year, while Harvard has seen returns of 12.3%.

When looking at the composition of the endowments’ portfolio, the biggest discrepancy is in allocation to private equity and hedge funds.

Yale puts 30% of its invested capital in private equity against 18% for Harvard, while Yale puts 20% of its capital in hedge funds while Harvard puts about 16% of its capital in hedge funds. Conversely, Harvard has more in natural resources, plain-vanilla stocks, and bonds and cash (which are very low risk).

Here’s the full breakdown of the differences in how the endowments are invested:

  • Private Equity: Yale: 31% | Harvard: 18%
  • Absolute Return (hedge funds): Yale: 20% | Harvard: 16%
  • Real Estate: Yale: 17% | Harvard: 12%
  • Foreign Equity: Yale: 13% | Harvard: 22% (11% foreign equity + 11% emerging markets equity)
  • Natural Resources: Yale: 8% | Harvard: 11%
  • Domestic Equity: Yale: 6% | Harvard: 11%
  • Bonds and Cash: Yale: 5% | Harvard: 10%

In its annual report for 2014, Harvard said, “One factor that continues to impact our performance is a real and visible overhang from underperforming illiquid investments made during the pre-crisis era. These investments will continue to roll off over the next few years.”

On Wednesday, Harvard also announced that Stephen Blyth, formerly the managing director and head of public markets at Harvard Management Co., which runs the company’s endowment, to the CEO role. Blyth’s appointment comes after the head of Harvard’s endowment, Jane Mendillo, stepped down in June.

A 2013 study showed that from 2009 to 2013, Harvard’s endowment saw the worst returns among Ivy League institutions.

Good luck, Stephen!

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