Yale University Investments office: June 2003

In recent years Yale has been among the more aggressive investors in hedge funds and private equity.

One of Yale’s strengths has been in its releationships with top managers in both the hedge fund and private equity world. However, a decision to reduce investments in these areas could damage those relationships. A decision to increase those investments would move Yale further away from its peers in terms of asset allocation, and may pose a risk to Yale in the future.

Another complication is that low interest rates and low projected equity returns has placed Yale in a difficult positions: Increase risk (including liquidity risk associated with alternative investments) or reduce return (and the payout that the school has come to rely on).

What would you recommend to Yale?

• Evaluate the relative risks of each decision.

• Develop a strategy for educating the university about your decision and what they can expect from the endowment in coming years.

• What will your decision communicate to future donors about the ability of Yale to manage their gifts in a prudent way?

In recent years Yale has been among the more aggressive investors in hedge funds and private equity.

One of Yale’s strengths has been in its releationships with top managers in both the hedge fund and private equity world. However, a decision to reduce investments in these areas could damage those relationships. A decision to increase those investments would move Yale further away from its peers in terms of asset allocation, and may pose a risk to Yale in the future.

Another complication is that low interest rates and low projected equity returns has placed Yale in a difficult positions: Increase risk