Led by Chief Investment Officer David F. Swensen and operating under the guidance of Yales Investment Committee, the Investments Office manages Yales Endowment.

Totaling $29.4 billion on June 30, 2018, the Endowment contains thousands of funds with a variety of purposes and restrictions. Approximately three-quarters constitute true endowment – gifts restricted by donors to provide long-term funding for designated purposes. The remaining one-quarter represents quasi-endowment, monies that the Yale Corporation chooses to invest and treat as endowment.

During the decade ending June 30, 2018, Yales investment program added $4.5 billion of value relative to the results of the mean endowment. The Universitys 20-year market-leading return of 11.8 percent per annum produced $27.1 billion in relative value. Over the past 30 years, Yales investments have returned an unparalleled 13.0 percent per annum, adding $31.6 billion in value relative to the Cambridge mean. Sensible long-term investment policies, grounded by a commitment to equities and a belief in diversification, underpin the Universitys investment success.

Yales Endowment is the engine that drives the university.It supports 34% of our total operations: from the financial aid we give to our great students to our cutting edge scientific research, from our world-class professors to our unparalleled art collections.The Yale Investments Office is simply the best in the world. It not only makes our research and education possible.It is itself the home of great research and education. It trains the best investment experts on the planet. It has changed Yale and the world.

Yale has the audacious goal of changing the world for the better. In order to meet that goal it brings together bright and talented undergraduates from every conceivable background, and it exposes them to ideas that are outside their lived experiences and even their imagination. In and of itself, this is an expensive proposition. It requires the best faculty, the best facilities, and the freedom to explore. None of this would be possible without the resources that the Yale Endowment provides. Knowing that the Endowment is there allows me to push forward, never hesitating to wonder if I can afford to aspire toward audacity.

Jonathan Holloway, Former Dean of Yale College and Edmund S. Morgan Professor of African American Studies

Without a robust endowment, the Graduate School of Arts and Sciences cannot fulfill its mission. Top-tier graduate schools attract the strongest and brightest candidates by offering generous financial support that covers all costs for the duration of study. The Endowment makes it possible to provide support that sustains exciting research across the Graduate School, benefiting the entire University. Every year, we admit just over 500 of the best students from a pool of more than 10,000 applicants, each of whom requires four or more years to complete their research, whether in the lab, in international archives, or in our own libraries and collections. While pursuing their scholarship, they also teach Yales excellent undergraduates and undertake other, important professional development activities. Our graduate students go on to become tomorrows leaders, whether as scholars, researchers and teachers, or, just as importantly, as contributors to non-academic pursuits.

Lynn Cooley, Dean of Yale Graduate School of Arts and Sciences and C. N. H. Long Professor of Genetics

More than half of the income of Yale Law School comes from Endowment income. If the Endowment did not grow, if it did not produce an adequate stream of resources, Yale Law School would lack the wherewithal to maintain its position as the leading law school in the world. Its as simple as that. The Endowment is the motor that powers the school. It is impossible to overstate its importance.

Robert Post, Dean of Yale Law School and Sol & Lillian Goldman Professor of Law

Yales Endowment supports a number of programs that are critical to the excellence of the medical school. Scholarship funds permit Yales School of Medicine to offer need-blind admissions with a very generous need-based financial aid program. Yale medical students graduate with a level of debt that is among the lowest in the country. Endowed professorships provide funds to support our best faculty and importantly help us retain those faculty at Yale. The Endowment also supports many educational and research programs that have no other source of financial support.

Robert Alpern, Dean of Yale School of Medicine

The Yale Investment Office is the essential complement to the work of Yale School of Management and other self-support schools at Yale. We will begin fiscal year 2017 with over $35 million in income from our schools share of Yales Endowment. Wow! Those resources allow us to invest and aggressively pursue our mission to educate leaders for business and society. The extraordinary performance and integrity of the Yale Investment Office give confidence to supporters who commit resources to the school. Donor support would be vastly diminished without that confidence and the expectation that the impact of their gifts will be sustained and indeed be increased over the long run.

Edward A. Snyder, Indra K. Nooyi Dean of Yale School of Management, and William S. Beinecke Professor of Economics and Management

The Yale University Art Gallery depends on the Yale Endowment for 62% of its annual operating budget, which helps ensure that the Gallery remains free for all no admission fees, no charge for tours, and no ticket costs for programs. One of the Gallerys signature educational programs, the Wurtele Gallery Teachers, engages graduate students who are trained to lead all of the K-12 and many of the public tours.The program has grown dramatically since the funds inception in 2005. The Wurtele Endowment started with $500,000 in principal, which generated income to support six teachers at its inception. With the success of the program, demand has grown, and with the success of the Endowment, resources have grown. Today the fund supports 17 graduate student employees who serve the more than 14,000 school children and thousands of public visitors who tour the Gallery.

Jock Reynolds, Former Henry J. Heinz II Director of the Yale University Art Gallery

The work of Team Swensen and the Yale Endowment has had an immeasurable impact on the Department of Athletics and the experiences of our student athletes. The alumni and friends of Yale Athletics have been incredibly generous with their gifts to endow many aspects of our sports programs. From head coaching positions to programmatic endowments that fund recruiting, equipment and travel needs – the growth of these funds allows our teams, students and coaches to have experiences that are unparalleled and in many cases life changing.

Nearly 75% of the Yale University Librarys budget is funded by the Endowment; without that income, the Library would be a mere shadow of what it is today. The breadth and depth of the Librarys collections are transformative to teaching and research at Yale, and it is the Endowment that funds those collections, year over year. Without the Endowment, the Beinecke Rare Book & Manuscript Library would simply not be, thereby depriving, not just the students and faculty of Yale, but scholars worldwide, with

access to one of the worlds largest libraries devoted entirely to rare books and manuscripts.

The Yale Investment Office seeks to provide high inflation-adjusted returns to support current and future needs of the University. We work to establish an appropriate risk-adjusted asset allocation and seek out long-term partnerships across the globe with managers who provide deep analytical insights and improve the operations of public and private businesses. Over the past 30 years, relative to the median endowment, Yales asset allocation has contributed 1.8% per annum of outperformance and Yales superior manager selection contributed an additional 2.4% per annum.

Yales portfolio is structured using a combination of academic theory and informed market judgment. The theoretical framework relies on mean-variance analysis, an approach developed by Nobel laureates James Tobin and Harry Markowitz, both of whom conducted work on this important portfolio management tool at Yales Cowles Foundation. Because investment management involves as much art as science, qualitative considerations play an extremely important role in portfolio decisions. The definition of an asset class is quite subjective, requiring precise distinctions where none exist. Returns and correlations are difficult to forecast. Historical data provide a guide, but must be modified to recognize structural changes and compensate for anomalous periods. Quantitative measures have difficulty incorporating factors such as market liquidity or the influence of significant, low-probability events. In spite of the operational challenges, the rigor required in conducting mean-variance analysis brings an important element of discipline to the asset allocation process.

Investor and Teacher Portrait: Alastair C Adams PPRP,April 1, 2015

Over the past 30 years, Yale dramatically reduced the Endowments dependence on domestic marketable securities by reallocating assets to nontraditional asset classes. In 1988, nearly three quarters of the Endowment was committed to U.S. stocks, bonds, and cash. Today, domestic marketable securities account for less than one-tenth of the portfolio, while foreign equity, private equity, absolute return strategies, and real assets represent over nine-tenths of the Endowment.

The heavy allocation to non-traditional asset classes stems from their return potential and diversifying power. Todays actual and target portfolios have significantly higher expected returns and lower volatility than the 1985 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 Endowments long time horizon is well suited to exploiting illiquid, less efficient markets such as venture capital, leveraged buyouts, oil and gas, timber, and real estate.

The Endowment spending policy, which allocates Endowment earnings to operations, balances the competing objectives of (1) supporting todays scholars with annual spending distributions and (2) maintaining that support for generations to come. The spending policy manages the trade-off between these two objectives by using a long-term spending rate target combined with a smoothing rule, which adjusts spending in any given year gradually in response to changes in Endowment market value.

Using the metrics of stable operating budget support and purchasing power preservation, simulations of Endowment performance demonstrated substantial improvement over the past thirty years. As Yale improved diversification by allocating more of the Endowment to the alternative asset classes of absolute return, private equity, and real assets, risks plummeted for both spending volatility and purchasing power degradation.

In 1985, when alternative asset classes accounted for only 12 percent of the Endowment, Yale faced a 21 percent chance of a disruptive spending drop, in which real spending drops by 10 percent over two years, and a 36 percent chance of purchasing power impairment, in which real Endowment values fall by 50 percent over fifty years. By 2016, when absolute return, private equity, and real assets accounted for approximately 74 percent of the Endowment, disruptive spending drop risk fell to 8 percent and purchasing power impairment risk declined to 10 percent.