After years of underperformance and as Ivy Leagues face federal funding freezes, Yale is considering selling off a portion of its private equity holdings on the secondary market.
A spokesperson confirmed in an email to Institutional Investor that the university is working with Evercore and “exploring a sale of private equity fund interests.” While Yale did not provide a target price for the sale, PEI Media initially reported that it could be as high as $6 billion.
Yale’s spokesperson added that the $41.4 billion endowment is not looking to dramatically reduce its allocation to private equity, which is significant. “We remain committed to private equity investments as a major part of our investment program and continue to make new commitments to funds raised by our current investment managers.”
The endowment invests heavily in nontraditional assets like private equity — including venture capital and leveraged buyouts — as part of its longtime strategy to pursue equity-like returns and diversification. Roughly 95 percent of the portfolio is allocated to growth-oriented assets like private equity, real assets, and global securities.
Yale’s effort to raise cash is emblematic of the real price of private market illiquidity for all colleges and universities. Data and analytics firm Markov Processes International says Ivies are already facing liquidity pressures as they raise cash for private equity capital calls. MPI’s analysis shows that Yale has unfunded commitments of 24.4 percent of its total investments in private equity, slightly below the Ivy average of 25.7 percent (Brown has the highest, at 34.3 percent, while Dartmouth has the lowest at 17.7 percent).
With the exception of Cornell and Columbia, unfunded private equity commitments significantly exceeded government funding for most Ivies in fiscal year 2024. Yale’s unfunded PE commitments as of FY23 were at $6.51 billion, versus $900 million in government funding in FY24.
“Federal funding cuts could impose significant financial strain on universities,” wrote MPI founder Michael Markov. “One key factor in determining a university’s resilience to such funding disruptions is the liquidity of its endowment.”
The endowment model developed by David Swensen had enabled Yale to outperform benchmarks for years, leading the industry to focus more on their high returns than on the risks these illiquid investments carried. An unintended consequence of Swensen’s model may be its vulnerability to external pressures like the government’s campaign to pressure universities.
“Ironically, the very approach that revolutionized endowment management also left these institutions exposed to liquidity constraints in times of financial or political stress,” Markov added.
Yale also is selling part of its private equity portfolio amid budget pressures from low endowment returns. Despite historically driving long-term outperformance, private equity has lagged in 2024 as stocks surged, dragging down Yale’s portfolio.
While its 10-year average return of 9.5 percent as of June 30 put the school in second place among the Ivies, its one-year return of 5.7 percent net of fees was the second lowest in its peer group. In fact, for three straight years, Yale’s returns have fallen short of the 8.25 percent needed to maintain current spending.
As Yale and the other Ivy Leagues gear up for a fight with the federal government over funding and control — they need to figure out how to fund their operations in the meantime. The Ivies and many other universities are considering options such as issuing bonds to meet their obligations, including funding legal costs.
