Yale is one of the richest universities in the world – its endowment was valued at $27.2 billion as of June 30, 2017. According to Yale’s Investments Office website, the school’s investment strategy is "active management" of "non-traditional asset classes." While Yale used to invest mostly in ordinary stocks and bonds, now the university’s money is overwhelmingly in private equity, shrouded in much greater secrecy. Most of these investments are held for Yale by hedge funds and other outside managers.
Among universities, Yale pioneered the practice of using outside managers to invest endowment funds in private equity. Leading this move was longtime Chief Investment Officer David Swensen. "His investment style is so well known," according to The Financial Times, "that it is often simply called the ‘Yale model’ or the ‘Swensen model.'" Chrystia Freeland, "Lunch with the FT: David Swensen," Financial Times, October 12, 2009
Today, more than half of university endowment assets nationwide are in non-traditional asset classes, and the endowments of several of Yale’s wealthy peers (including Princeton, MIT, and the University of Pennsylvania) are run by investment managers trained by Swensen at Yale. Roger Lowenstein, "Why Colleges Are Getting a ‘C’ in Investing," Fortune, December 9, 2016 David Swensen is one of the most influential investors in the world. His model dominates the world of university investments, and investing Yale’s money is "one of Wall Street’s most coveted seals of approval." Chrystia Freeland, "Lunch with the FT: David Swensen," Financial Times, October 12, 2009
Furthermore, some of Yale’s top donors hold large amounts of Puerto Rico’s debt. Charles B. Johnson is the largest individual donor in Yale’s history – he gave $250 million in 2013 to construct two new dormitories. Johnson is the largest shareholder and retired chairman of Franklin Resources, which is the second largest holder of Puerto Rican bonds.
Swensen’s tremendous influence makes Yale uniquely positioned to make a difference and provide real financial relief for the people of Puerto Rico. Yale must take the lead and cancel any debt it holds and encourage its investment managers and key donors to do the same. As we’ve seen before, if Yale leads, others will follow.