The Super Endowments of Harvard and Yale

Of the US endowment funds, Frontier places significant emphasis on the asset allocation methodology of the ‘Super Endowments’ of Harvard and Yale.  These endowment funds have been two of the best performing with annual returns consistently placing them in the top 10 of all US endowments.  For the 10 years ending June 2007, the annualised returns for Harvard and Yale are 15.0 and 17.8 per cent respectively (see Table 2), greater than the returns of their peers and those of traditional portfolios.  The Harvard endowment fund is also the largest in the US at $34.9 billion and the Yale Endowment fund is the second largest at $22.5 billion.

The Super Endowment funds have been pioneers in multi-asset investing.  Currently 45 per cent of their portfolios are in traditional assets (see Chart 3), much less than the 80 per cent for the average endowment.  Of their alternative assets, the majority is allocated to hedge funds.  However, the Super Endowments’ holdings of commodities and private equity are much greater than the average endowment.  

Chart 3
Super Endowment Asset Allocation (June 2007)

Like endowment funds in general, the asset allocations of the Super Endowment funds have been very stable over-time.  Since the 1999, the Super Endowment funds have only reallocated an average of approximately 8 per cent of their portfolio annually (see Chart 4).  The stable allocations reflect their long term investment horizons and willingness to invest through economic cycles.

Chart 4

Super Endowment Asset Allocation Over Time

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