Yale University Investments Office Harvard Case Solution & Analysis

Yale University Investments Office Case Study Solution 


Yale University was established in 1701. Formal endowments to the university started from 1818 as the disestablishment of Congregationalism occurred. The donations received by the university,  were used in purchasing land and constructing buildings. Remaining funds were used for corporate bonds and equities. In the late 1990’s, endowment amount reached to $5 million.

The endowment amounts were rapidly growing in early 20th century, as university had made aggressive investment in its equities. As a result, the equities of endowment reached to 42%, however, other universities contributed only 11% equity of endowments. As the company was highly investing in equity, it planned to make few policy changes, which would be decided by trustees. It includes, increasing university’s exposure to equity market such as private equity firms. On the other hand, it decided to hire an external portfolio advisor

A new manager and head of Yale Investment Office was hired which initiated a highly efficient and experienced team. Moreover, he determined the difference between Yale and other universities, which refers to the different investment policies and philosophy. Few investment principles have been made by new manager. These includes, strong belief in equities, whether it is public or private, as it provides higher return than risk free securities. Another principle followed by manager is to invest and hold a diversified portfolio, as it reduces the risks involved and short term fluctuations. Moreover, the manager also follows the principle to find opportunities in less efficient market as they strive much harder than high efficient countries and thus, provides higher returns. In addition, he also believed to utilize outside managers and advisors mostly for routine investments. However, these managers should be analyzed carefully before making any hiring. Lastly, critical philosophy should be focused on the incentives to be faced by outside managers.

A different investment management philosophy has been made by the new manager such as investments in private equity and less efficient company, real assets which includes real estate, gas, oil and timber and lastly, the absolute return investing. Using this approach have facilitated the university with successful and satisfactory returns.

Problem Statement

As the Investment Office of Yale university is making significant growth in endowments due to the principles and strategies used by newly hired manager, this department of university is thinking if it could work for long term, if yes than how much time this direction of investment could be followed. In addition, the university also wanted to determine their response as their differentiated university is being popularized that they had chosen private equity investments in order to increase its capital.

Quantitative Analysis

The following numbers supports investment policy statement and assets allocation:


The risk factor is very important to form Investment Policy statement as it advices the firm to not to invest in a highly risky profile.Moreover, it is also important to analyze risk factor to compare it with return percentage. In order to avoid risk, the investment should be diversified.in addition, the prudent rule determine to avoid high risk.


An investment is made to generate higher return. Therefore, it is very important to know the return generated from investing in a respected field.


Under the head of constraints, it is very important to know the taxes to be paid upon investment as it decreases the value of return generated. Moreover, level of liquidity should also be known in order to make a perfect IPS.

Qualitative Analysis

Following factors are required in order to support Asset Allocation and IPS:

Time Horizon:

It is very important to know the time horizon and limitation of timings I order to make investments. As longer the investment, lesser return would be generated. However, some investors prefer lesser return for longer period of time and some investors wanted to gather higher return in short period of time.

Legal regulations:

Legal regulations play an important part to make investments, especially in foreign private firms and companies. As difference in legal regulation lessen the return generated from different investments.

Uncertain Circumstances:

Uncertain circumstances arrived at the time of investment or return decrease the level of investment. Therefore, the investor should forecast the uncertain circumstances in order to void higher loss and threat at the time of investment.

Investment Policy Statement

In order to make investment Policy Statement, following factors have to be discussed:


Yale University Investments Office Harvard Case Solution & Analysis



Investment 1: absolute Return Investment:

Yale owned 15% US common stock, which was small compared to other large institutions. However, Yale had made earlier investments and the managers are highly confident in their abilities to manage their shares. Moreover, 10% of endowment assets are allocated to foreign equities, which represents principle of diversification, as they are partially related to US equity market.In addition, it has also made 22.5% of its resources in absolute return strategies, which heads under publicly traded investments.................

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