Yale University’s $25.4 billion endowment recorded a total return of 3.4 percent in fiscal year 2016, according to its latest annual report, which lays out the endowment’s performance in 2016 as well as some of its investment strategy and philosophy.

At 13.0 percent of plan assets, real estate accounts for a much larger proportion of assets under management at the Yale Endowment, compared with other endowment funds, which have an average allocation of 3.9 percent. Still, the endowment lowered its target allocation to real estate in 2016 to 12.5 percent from 13.0 percent. The endowment targets a long-term allocation to illiquid assets — including real estate as well as leveraged buyouts, natural resources and venture capital — of approximately half the portfolio.

The report notes, “The heavy allocation to nontraditional asset classes stems from their return potential and diversifying power. … The endowment’s long time horizon is well suited to exploit illi