Yale names Matthew Mendelsohn to run $31bn endowment

Yale names Matthew Mendelsohn to run $31bn endowment

Yale University has appointed Matthew Mendelsorn to replace David Swensen as head of its influential $ 31 billion fund, emphasizing the growing importance of private capital to large investors. ..

Swensen died In May, after a nine-year fight against cancer and a 36-year mission that led the donations of his alma mater, he revolutionized the industry thanks to big pioneering bets on hedge funds, private-equity funds and venture capital. ..

The investigative commission, chaired by former Yale University provost Ben Polak, “leaves no stones” in the search for Swensen’s successor as chief investment officer of the fund, the university said. statement..

“In the end, the right answer was right in front of us. Matt Mendelsohn pays homage to his colleagues, managers, and chief investment officers in the industry. He also invests, builds, guides, and yells teams. We have an extraordinary record of representing the best of the university, “Polak said in a statement.

The decision to promote 36-year-old Mendelson to the best job highlights the importance of unlisted private assets to the enviable interests of Yale University over the last three decades. Mendelsohn is currently leading the fund’s venture capital investment, which accounts for more than 25% of $ 31 billion.

Yale Fund’s earnings have faded a bit over the last few years, but the average annual earnings over the last 30 years is 12.4%, making it one of the best in the global investment industry, both in size and length.

Over the last decade, $ 9.5 billion more than the average US university fund, the so-called “Private capitalInvesting in private equity and venture capital classes of private equity is a major reason for its good performance. The fund estimates that Mendelson-supervised venture capital investment has returned 21.6% annually over the last decade.

“In the last 14 years, we haven’t been able to ask for more investors to learn and work with,” Mendelson said in a statement. “I am honored to be given the opportunity to lead this team. The team’s outstanding professionals excel not only in their investment talent, but also in their commitment to the principles that guide Yale’s mission.”

After graduating from Yale University with a bachelor’s degree in physics, Mendelson joined the fund in 2007 and was captain of Swensen’s beloved fund softball team, Stockjox, for three years.

Investment industry head hunter Charles Scolina said many before Yale appointed Mendelson, given that Swensen’s long fight against cancer gave the fund enough time to find a successor. I was skeptical that I had to kick the stone.

“Culture, institutional memory and tradition are key elements of Yale’s donation performance, and Matthew Mendelsohn is what we do. [Yale Investments Office] “Staff,” said Scolina. “All Yale, about 36 years old, responsible for the highest performing asset group in the portfolio. Berlinger.”

Nevertheless, Mendelson steps into Swensen’s investment shoes Very difficult time For the money management industry.

During much of Swensen’s time under the direction of the Yale University Fund, both the bond and stock markets have enjoyed a remarkable boom, driving economic benefits far beyond historical standards.

More recently, the financial crisis and the subsequent Covid-19 crisis have prompted central banks to aggressively inspire, with valuations hitting record highs in most major markets. Many industry executives and analysts are worried that this will inevitably hurt future profits.

The inflation-adjusted annual earnings forecast (%) bar chart for the next seven years shows that GMO is forecasting severe growth for most investors due to price growth.

Investment Group AQR estimates that, given current valuations, a traditional portfolio split into 60% of equities and 40% of bonds will return only 2.1% each year after inflation over the next 5-10 years. increase. Another asset manager, GMO, predicts that all major asset classes will suffer substantial losses over the next seven years.

Meanwhile, alternative investments, bearing the name of Swensen and setting the fund’s record, are now commonplace, with billions of dollars invested in private equity, venture capital, natural resources and real estate. Many experts are worried that revenues in these areas will also decline as a result.

“We will evolve to face new challenges, but by building on a strong foundation, the future will definitely rhyme with the past,” Mendelson said.

Reporters for this article are on Twitter @robinwigg and @chrisflood_FTfm, and email robin.wigglesworth@ft.com and chris.flood@ft.com.

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