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Yale says its endowment lost 25 percent since June
December 16, 2008 / 9:57 PM / in 9 years

Yale says its endowment lost 25 percent since June

BOSTON (Reuters) - Yale University’s endowment has lost 25 percent, or $5.5 billion, in four months, becoming the latest wealthy university to say how much of a bite the current financial crisis has taken out of its finances.

Yale President Richard Levin wrote to the school’s faculty and staff on Tuesday, warning them the decline would force budget cuts in coming academic years.

“Our best estimate of the endowment’s value today is $17 billion, a decline of 25 percent since June 30, 2008,” Levin wrote, adding: “This is the value we are using for purposes of budget planning.”

He said the school would need to reduce all wages and non- salary expenses such as travel and consultants’ fees by 5 percent for 2009-2010, and by another 5 percent the following year.

Yale’s announcement comes days after its Ivy League rival, Harvard, said its endowment had lost 22 percent and that it would likely post its worst returns in 40 years.

In its last fiscal year, which ended on June 30, Yale earned a 4.5 percent return on its investments, bringing the endowment to $22.9 billion.

Now standing at $17 billion, exactly where it had been in January 2006, Levin said it “is still a very large endowment.”

He said “it is important to keep in perspective that the University is much stronger than it was a decade ago.”

Yale said its endowment declined 13.4 percent through October 31 in the value of marketable securities such as stocks and bonds. But the school also invests in illiquid securities such as private equity and real estate, which are difficult to value.

By relying heavily on alternative investments such as hedge funds, real estate and timber that have helped the school deliver top returns for years, Yale’s chief investment officer David Swensen has long been admired in the investment community.

But this year, many of the school’s bets have fizzled as the average hedge fund has lost roughly 18 percent this year.

Reporting by Svea Herbst-Bayliss; Editing by Andre Grenon

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