Yale trims private equity allocation

However, private equity will remain the largest asset class in the portfolio and the weighting is still larger than that of most of its educational peers.

As of July 2014, Yale will trim its private equity exposure to 31% from 35% in the 2012 fiscal year target. Real estate will also see a cutback, falling from 22% to 19%, but the other major illiquid asset class in the portfolio - natural resources - is set for a one percentage point jump to 8%. The endowment will also increase its exposure to absolute returns, foreign equities and cash and bonds.

Yale revealed the change while announcing that investment returns for the year ended June 2012 were 12.5%, taking the total value of the endowment to $20.8 billion, up from $19.3 billion the previous year.

The Yale endowment has returned 11% per annum over the 10 years to June 2013, outperforming domestic stocks and bonds as well as the estimated 7.8% average return for college and university endowments. The endowment has generated returns of 13.5% per annum over the last two decades, growing from $3.2 billion to $20.8 billion during the period.

However, the Yale model, developed by CIO David Swensen, was questioned in the aftermath of the global financial crisis. Many institutions suffered a sharp denominator effect as public markets assets declined in value, pushing percentage alternative assets exposure beyond normal tolerance levels. The illiquid nature of these assets made it difficult to redress the balance.

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