As someone who is known for evangelizing the benefits of including illiquid investments in client portfolios, one question I am often asked by investment advisers is, Should I simply follow the Yale endowment model of asset allocation?
Let’s first explore why Yale’s endowment is seen as a model for asset allocation: long-term performance. During the decade ending June 30, 2016, Yale’s investment program added $7.1 billion of value relative to the results of the mean endowment. The university’s 20-year return of 12.6 percent per annum (with notably lower volatility) produced $22.1 billion in relative value. Over the past 30 years, Yale’s investments have returned 12.9 percent per annum, adding $26.6 billion in value relative to the Cambridge mean.
Based on performance alone, should we invest our assets exactly like Yale? The short answer is no. Yale is an institution with a seemingly infinite half-life; one that can