Yet another large university endowment has indicated that it suffered significant losses during the recent economic storm. An article in The Wall Street Journal (September 25/26, 2010) indicates Yale’s endowment fell from $22.9 billion in June 2008 to $16.3 billion in June 2009. It has since recovered to $16.7 billion as of June of 2010.
The endowment earned 8.9% for the 12 months ending June 30, 2010. According to Wilshire Associates, this lagged the 13.33% median return for large endowments, pension funds, and foundations. The Dow Jones Industrial Average returned 18.9% for the same period.
The results at Yale are particularly interesting. I am a big fan of David Swensen who is the Chief Investment Officer at Yale. I’ve read Swensen’s book, Unconventional Success which advocates a passive investment strategy for individual investors. Swensen believes only large institutions with significant resources for in depth analysis and research should invest in areas such as private equity, real estate and hedge funds. As it turns out, these are the areas where Yale incurred its big losses.
The lesson for the individual investor is that a low cost, passive approach to investing will result in optimum long term results.
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