September 23, 2009 / 1:04 AM / 10 years ago

Yale endowment has investment loss of 24.6 percet in fiscal year

BOSTON (Reuters) - Yale University said on Tuesday that its endowment produced an investment loss of 24.6 percent in the fiscal year ended June 30, when big bets on private equity holdings, real estate and commodities soured.

The endowment’s value fell to $16.3 billion based on investment losses of $5.6 billion, operating budget distributions of $1.2 billion and gifts and other adjustments of $200 million, the university’s Investments Office said. The endowment was valued at $22.9 billion on June 30, 2008.

The Ivy League school said real assets, its largest asset class declined 33.9 percent while private equity holdings in leveraged buyouts and venture capital lost 24.3 percent and energy investments tumbled 47.4 percent.

Yale, the country’s second richest school after Harvard, said two weeks ago that it was expecting to report that its endowment had declined to about $16 billion in the fiscal year ended on June 30.

On Tuesday it reported its actual declines, giving new detail on how certain asset classes performed.

For years Yale’s double-digit investment gains were the envy of the investment world as Yale’s managers relied heavily on alternative assets.

The portfolio returned 28 percent in fiscal 2007 and 41 percent in fiscal 2000.

Over the last decade the endowment returned an annualized 11.8 percent, far exceeding more traditional investments’ returns.

In fiscal year ended June 30, however, alternative assets hurt endowments more than they helped and traditional investments in bonds delivered the best returns.

Yale’s holdings of U.S. Treasury bonds returned 5.1 percent but the school allocated only 4 percent of its portfolio to fixed income securities.

New Haven-based Yale’s investment loss was far bigger than the median large endowment’s 18 percent decline, according to data from consultants Wilshire Associates.

Endowments that pursued a more conservative strategy, like the University of Pennsylvania and Columbia, fared better.

Harvard, whose endowment also relied heavily on alternative assets, said recently the value of its endowment’s investments fell 27.3 percent last year. Harvard said it would alter its strategy to become slightly less risky.

Reporting by Svea Herbst-Bayliss; editing by Carol Bishopric

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