Monday, March 08, 2010 1:45:38 PM
Oxford Endowment Chief: No to the Yale Model
After only seeing a 4%
decline in endowment assets during the Great Recession, Oxford endowment head
Sandra Robertson speaks out against the often-emulated Yale Model of
investment.
(March 8, 2010) –
Universities in the United Kingdom should not try to emulate the notorious
“Yale Model” of endowment investing, the head of the $1 billion Oxford
endowment has said.
Sandra Robertson, leader
of Oxford University Endowment Management (OUEM) – the company formed in 2007
to oversee the University’s and many of its colleges’ investment funds – has
told London’s Financial Times (FT) that universities on the British Isles
“should not try to emulate the Yale Model”, the investments style pioneered by
Yale chief investment officer David Swenson that relies heavily diversification
into the so-called illiquidity premium provided by alternative asset classes.
Instead, the endowment relies on real assets – agricultural estates being one
prominent example – with the goal of fending off inflation, and a low exposure
to global equities. The latter was a reaction to unprecedented levels of
volatility seen in the first half of 2008, Robertson said.
“I strongly believe no
university should have the same asset allocation [as other universities],”
Robertson is quoted as saying in the early March interview. “We talk to Yale
and Harvard but we don’t try and emulate them. “There is no point in having a
large allocation to private equity if you have no idea what you’re doing.”
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The Oxford head has some
evidence back here up: in the fiscal year ending in July, 2009, the ancient
institute of learning lost just 4.8% of its endowment holdings, well above the
average loss of between 19% and 23% seen in American universities over the same
time period. Larger American endowments often faired even poorer, with Yale
posting a 28.6% decline.
OUEM does not manage all
of the money in the relatively decentralized University system. Two-thirds of
the school’s 30-odd colleges manage their investments themselves or outsource
the job. Many of these colleges saw steeper declines than OUEM, with some of
the more prominent colleges nearing the average endowment losses seen in
America.
“Some of the smaller
colleges are struggling to get diversification in their portfolios but we don’t
have a mandate to invest on their behalf,” Robertson told the FT.
To contact the ai5000 editor of this story: Kristopher McDaniel at kmcdaniel@assetinternational.com