Yale Investment office

Recommendation for Yale Investment Office

With capital flooded into the private investment market, the private equity industry has changed a lot. First, private equity groups would become more conservative about their investments. They would tend to invest in low-risk, low return transaction to ensure that they can raise the next fund. Second, the price competition is more intense with the influx of capital, and it is difficult to get substantial allocation to top-tier private equity funds because these funds are in demand. However, private investment market is still attractive to Yale because Yale has three advantages: historical success, strong relationships with key managers and a considerable understanding of the private equity process. In addition, Yale would not be able to invest in private equity funds in later more favorable market if it does not invest in these funds currently.

Like venture capital in the late 1980s, real estate in the 1990s, and real assets in the early 2000s, the international private equity funds today seemed to be a compelling category to invest in. The global private equity markets are far less competitive than the U.S. market, which indicates that global private equity markets have more attractive investment opportunities. Particularly in China, there are lots of small entrepreneurial firms with operational experience on the ground, some coinvestment and incentive fees, and an apparently keen sense of where upside opportunities might lie. Thus, it would be a great benefit for Yale to expand its international program to include a greater emphasis on Asia and other emerging markets.

One of Yale’s investment principles is to seek opportunities in less efficient markets by selecting superior managers in nonpublic markets characterized by incomplete information and illiquidity. In the long run, Yale should consider about the issue of portfolio liquidity as well as its increasing