Yale

“If you don't have that allocator's edge, and you don't think you should have it, you probably shouldn't play the game.”

“Whereas Yale's model Likely sustains itself past Dave Swenson for many years because it's mostly, you know, very well-selected external managers.”

“In the early nineties, Yale systematically went out and imposed cost of capital hurdles on their managers, and managers who understood those economics, most of which did, they were the beneficiary of it would do something reasonable because the supply and dema…”

“Yale did not ever take economics in businesses. However, they Often were very early. I'm not sure about first or very early and meaningful in the success of many of the funds that people know of today. And I think that's consistent with how David views the wor…”

“In general, I think endowment portfolios were still relatively conservative and relatively simple in their structure. Now, Harvard had obviously evolved. Yale was beginning to evolve. Notre Dame and Duke and some others were starting down that path, but it was…”

“The average person at Yale is being charged about 24,000 dollars a year.”

“So people making between zero and 40,000 actually pay nothing to go to Yale, right?”

“And fast forward 20 years, that portfolio, which was levered two to one and used alternative investments, which in the eighties and nineties were something inconceivably risky to most, that portfolio outperformed Yale on a An absolute and a risk adjusted basis…”

“And there is no better training. There's no better Discipline. There's no better process that I've seen in my career than what David and Dean Takahashi put together at Yale.”

“And at this time was right when endowment and foundation money management was undergoing its own level of professionalization. For decades before that, you had had sort of the treasurer of the university or the treasurer of a foundation serve as the primary pe…”

“If you find somebody you like and no other great investors are investing alongside you, I think you have to ask yourself, like, am I that much smarter than all these people at Yale who have been doing this for 20 years or at Princeton or at Stanford? Like, why…”

“Because I was in emerging growth technology, there was a whole network of people that I knew from my nine years in San Francisco that were venture capitalists, growth equity investors, CEOs, and that provided a really nice database for me when underwriting new…”

“That is one thing I wouldn't do if I hadn't come from Yale and brought venture capital relationships with me or come from Silicon Valley where I'd had the network. It would be really hard to build it otherwise.”

“We have a much larger public equity portfolio than Yale does, and we probably always will.”

“Tim Sullivan used to say this thing, which has really stuck with me, and I repeat it often, which is, you don't have to do every good deal. Just every deal that you do has to be good. And so you have to be not afraid to miss something good. So you're really pl…”

“We don't need to be Yale, so we target a beta of about .6, and from there build a portfolio around it.”

“People spend Far too long predicting what will happen in an exchange. And so in other words, you and I are negotiating in two weeks, and it could go X, Y, or Z way, and people will sit there and try to plan and think, like, is it going to be X? Is it going to …”

“Often negotiators, when I see entrepreneurs do entrepreneur buyouts and spin outs through Yale a lot, and they fight on every issue. Like if it's a low success, a medium success, a high success, They grab at each level, even though one level is super valuable …”

“And that's coming from my perspective working at Yale, where that number is close to zero. Basically everything, unless there was a really, really good reason why, basically everything would get approved.”

“The biggest difference is sharing, because when I sat at Protege, or even when I sat at Yale, sharing what you were doing and sharing it publicly certainly was not a part Of your job. In fact, some people would say that is a detriment to your returns, but that…”

“So sure enough, Lehman was on the list years before the Lehman problem, and years before the Lehman problem, they were taken off the list. And why? Because if you examined it rigorously and carefully, you would realize they're not quite as good at this kind of…”

“And the characteristics of that unusualness would be first that they were Yale chosen when they were first getting started. And then Yale would be a major account for them. Usually their sole major account or their leading major account. And usually right from…”

“Well, first of all, very few of the managers he's chose at any time were at all widely known. They just were never widely known until after they had been chosen.”

“And when we worked at Yale, you weren't allowed to share anything with anybody.”

“When you dip your toe in, when you're invested in something, you just learn more. You pay more attention. You live it and breathe it, right? The ups and the downs. And so for me, and I think by being invested in it, you then get greater conviction if there is …”

“While on the other hand, for Yale or Princeton, they could just double their tuition. They still fill every seat.”

“I do think from the diversity, equity, inclusion point of view, even for Places like Princeton and Yale, when they're retrenched, it's really the lower end, the lowest rung of employees that end up getting retrenched. The tenured professors do not.”

“Is it appropriate, therefore, for another institution to copy Yale's endowment model? The answer is, if you're Princeton, yes. If you're some very small university in the middle of the country that's already having trouble getting students each year, no, becau…”

“Part of me thinks the technologized model is going to empower them to be even better at the Yale model. Why? Because you're just going to have much more confidence in how your GPs draw and return capital.”

“I remember seeing some analysis that suggested that half of the value that Yale had added over time relative to peer endowments was from asset allocation and half was manager selection.”

“Investors following David Swenson too often miss the mark in their interpretation of his theory. Like children playing the game telephone, they listen to other voices and echo beliefs with shakier foundations than Yale's.”

“And believe it or not, we paid fourteen million dollars for a 50% interest in a Fifth Avenue asset, which is mind-boggling these days.”

“When they agreed to sell the deal for, I think, forty-seven million in the mid-nineties, Yale stepped up and matched the offer. So we're in the deal for sixty million bucks, and it was almost a 500,000 square foot asset.”

“And in most cases, Yale was doing the lion's share of the legal work on behalf of the investor group.”

“We ripped off the front of the building and expanded it, and Yale probably made a hundred million dollars on the redevelopment.”

“David Swenson was a first principles investor, and he looked at the real estate business in the eighties and said, this doesn't make any sense. And he thought that the fee-based nature of the business, there was no alignment of interest. There was lots of sepa…”

“And it's funny, because we went to all these very impressive Yale professors and asked them, how do we create a portfolio? How do we Find the efficient frontier, all these economists like Ibbotson and Stephen Ross and people like that, and they just said, find…”

“They wanted to open up their first Apple store in our building, and we were very close to wrapping up a deal with someone else. We spoke to Steve Jobs, and he explained his vision for the business, which, to be honest, is exactly what turned out to be the case…”

“Those first principles for a pool like Yale, with very long duration assets, with very minimal spending needs, were to have an equity bias, because those spending needs, while minimal on a year-to-year basis, are high. Needs to spend at roughly five percent re…”

“I think second is confidence when not to be interesting. I think certain institutions, Yale, MIT, have the resources to always be interesting. Everything they do is interesting. But for something without resources, without that access, maybe the answer is an E…”

“Those trade-offs are more attractive than the asks from most other sources of startup capital.”

“Yale provides cover for more institutions to create similar programs and for those with existing programs to continue.”

“On the investment side, most CIOs will embrace the opportunity to wait and see which managers Yale supports in size. They're happy to outsource wading through large fields of chaff and see if Yale finds wheat.”

“As many of the fellowship managers return to the market and struggle without Yale's backing, Yale may find it more difficult to be seen as an emerging manager allocator of choice.”

“Spinouts of top investment managers may find Yale an attractive partner, especially knowing that Yale does not ask for economics in the newly formed business.”

“Yale will be deluged by inbound interest, most of which will be of lesser quality than Yale has reviewed historically.”

“Although we see in the market that Yale and Harvard are selling, this is not their first sale. It's just actually a return to them selling.”

“Early days at Yale, we were targeting market value as a percentage. And so when you're in a bubble, it tells you to over allocate at the top and under allocate when you're in the bottom. So we changed that to grow every client's portfolio by their expected ret…”

“They'd have funds where 90% of the companies they invested in were profitable deals.”

“People read the book and see all the success Yale has had in the private equity world, in the hedge fund world, in places where manager selection is really by far the most important factor in success.”

“We had a firm that we worked with. We were in their first two institutional funds in the early 2000 period. They were both spectacularly successful. When they raised their third institutional fund, they set out to raise a fund that was seven and a half times t…”

“So we made a list of 15 different firms, went out and met all of them. Within five years, we were investors with virtually all of those firms, and most of them did fabulously well for us in the nineties and many since then, and some of them are still in our po…”

“Whereas we want to make a huge amount of money in China, as China opened up as an investment opportunity, but a lot of that happened because of our relationship with Lei Zhang, who founded Hill House, and he happened to go to Yale's business school, and he hap…”

“That's playing out in real time in larger firms that Yale has worked with, and we're not always sure that that's going to be a successful evolution in the long run.”

“We had some spectacularly bad funds in the late nineties that we committed to, but their predecessors More than paid for what we lost in that period of time.”

“Yale was already an investor with some of the preeminent firms in Silicon Valley and Boston. Sequoia, Kleiner, Perkins, Mayfield, people like that.”

“One of our venture capitalists had a famous quote, our winners we sell for 20 times our money, and our losers we sell for three times our money. And it was true.”

“There certainly weren't instances where we were an investor with somebody, pulled the plug, and then got back on board. That was often just too hard.”

“He was 33 years old at the time, and he'd been in the job for probably two and a half years, so it was a pretty gutsy thing for him to do. We wound up having to do some things to mollify the chairman, which David wasn't exactly thrilled by, but we mostly got w…”

“Three years ago, before the current unpleasantness and the venture capital green business, we were number zero on the Cambridge Associates database, which is their code for number one. On a ten-year basis, we were beating Harvard and Yale and Princeton with ou…”