Yale’s prestigious endowment has been trying to unload one of the largest private equity portfolios ever sold, a move reflecting pressures on Wall Street and higher education under the Trump administration.
According to the three on the sales process, the Ivy League school seeks buyers with up to $6 billion in private equity and venture capital stakes, due to uncertainty about its federal funding and the reality that many of these investments don’t provide the excess returns Yale expects.
Yale University is now about to complete a portfolio sale of about $3 billion and sell its assets at a slight discount, one of the people said.
“It's important,” said Sandeep Dahiya, a finance professor at Georgetown University. “Investors of the leading architects investing in the private equity market are lifting it up.”
For decades, Yale has been seen as a pioneer in transferring its investments from stocks and bonds to long-term holdings managed by private equity and venture capital firms. But last year, Yale’s $41 billion donation earned just 5.7%, underperforming the S&P 500 and other major indices. Yale University said its 10-year return is 9.5%.
Private equity investments usually generate cash for donations and other investors after a company sold or invested publicly. But recently, private equity and venture capital firms, which make up about half of the Yale endowment, have worked hard to sell it in the company and return cash to investors. That took the reward.
Yale’s seeks to withdraw from well-known companies such as Bain Capital and lesser-known companies such as Golden Gate Capital, Clayton Dubilier and Rice and Insight Partners, is a sharp turnaround in donations that have long been masquerading as the value of private equity and other long-term investments.
Yale bankers know that some bets are harder to sell than others, so they offer potential bidders, which are two separate lists of funds. “Core” funds, the funds they want to sell the most; according to two people briefed the deal, “sweeteners” are the best performers.
Although buyers can only receive a small discount on private equity shares, the fact that Yale is willing to sell assets that once had high expectations of no more than the full value reflects the industry's challenges.
The sales are a key point for colleges. Although President Trump has exempted Yale from punitive cuts to Ivy League schools like Harvard, Yale is struggling to get a large reduction in federal research funding for higher education. Republicans in Congress also proposed a huge tax increase in endowment funds.
Yale University is expected to spend about $2.1 billion from its endowment in 2025, accounting for more than a third of its annual budget.
In a statement to The New York Times, Yale donation representatives acknowledged the deal, but said private equity was “a central element of our investment strategy.” “We have not reduced our long-term goals to private equity,” the statement added. The university said it also hopes to invest in other private equity firms.
Yale University bankers tried to be cautious by giving the name of the sale code “Project Gatsby”. (Two main characters of F. Scott Fitzgerald's roaring novel in the 1920s appeared at Yale.) However, Yale's move was widely seen as a harbinger on Wall Street.
At least two large universities are preparing to sell some private equity assets, and dozens of assets in ours and Asia are looking for exports.
Lawrence Siegel, former research director at Ford Foundation, called Yale’s move “wake up the phone” for investors.
“This is also what Yale University is trying to leave in front of everyone else,” Mr. Siegel said.
Swensen Model
In 1985, former Lehman Brothers Banker was formerly David Swensen of Lehman Brothers Banker, who joined Yale University’s chief investment officer, whose endowment was worth approximately $1.3 billion ($2.7 billion from Harvard).
In 2021, the year Mr. Swinson died, Yale University’s donations had expanded to $42.3 billion, second only to Harvard, but were leading billions of dollars on the basis of donations from almost other universities.
To achieve this, Mr. Swanson transferred Yale’s investment from traditional 60% stock and 40% bonds. After knowing fund managers at private equity and venture capital firms, Mr. Svenson transferred the relatively large Yale endowment to long-term assets, which are usually invested for decades.
Other universities watched Yale’s rewards and began following the Swensen model, which is well known.
Yale’s early feelings for private equity provide the perfect advertising for industries looking to attract new investors.
“Do you want to be as smart as Yale?” said Ludovic Phalippou, an economist at Oxford University, when describing the stadium.
According to research by the Association of University and University Business Officials, university endowments now invest an average of 17.1% of asset assets in private funds. This was 5.4% in 2007 before the financial crisis.
Universities and private equity firms have established symbiotic relationships. Endowments typically pay private equity firms 2% of their managed funds, and 20% of the profits they generate.
These expenses have helped create billionaires, many of whom sit on the university board and donate heavily to schools.
Senior trustees at Yale University, such as Joshua Bekenstein, have worked at Bain Capital four years after graduating from Yale University. The Boston-based company was one of the first to enter the acquisition business. It shoveled up companies like Dunkin' Donuts, Clear Channel Communications and Gymboree, increased debt and then tried to sell them for profit. Seven years after Bain bought it, children's clothing retailer Gymboree filed for bankruptcy.
Bain now manages $185 billion, including at least $1 billion at Yale.
In the more than a decade after the financial crisis, U.S. private equity firms have reliably produced average returns on paper, on paper, teenagers, according to data provider PitchBook. However, these companies have average returns below 10% in 2022 and 2023, while the average returns in 2024 are slightly above 10%.
Another challenge: transactions have been slow for several years, and private equity firms have difficulty selling their shares at levels that have been achieved in previous years and returning cash to investors. Although optimistic, the second Trump administration will stimulate a resurgence of transactions, volatility around tariffs has kept companies on their guard.
In 2024, the companies returned about 15% of the value of their funds to investors, compared with 25% to 35% in previous years, PitchBook data shows.
Data from the award book shows that from 2021 to 2024, the reward returns for private equity companies were proposed in private equity companies, with record sums from pensions, endowments and sovereign wealth funds.
Steven Meier, chief investment officer of New York City retired SystemAcknow, announced the return on private equity was “bad.”
The system manages a $280 billion portfolio for pensions for teachers, firefighters and other public employees, selling $5 billion in shares in private equity firms alone. Mr Meyer said the city will continue to invest in private equity but hopes to pay lower fees.
He added that the recent return of the funds to pensions and endowments was also “disappointing”.
Gatsby Project
When Yale Yale bankers started shopping for the endowment foundation’s private equity portfolio in April, they did not reveal the seller’s identity.
But they left a clue: They called the sale “Gatsby Project.”
Bidders are asked to select funds from a combination of “sweetener” and “core” asset libraries and list their prices by May 6, according to sales documents viewed by the New York Times, with Yale bankers aiming to end on June 30.
Some details of the Yale University sale were earlier reported by middle school investors and Bloomberg.
Yale Shopping's largest unit position is a 2007 fund run by Golden Gate Capital, a San Francisco-based private equity firm that mainly invests in retailers such as Ann Taylor, Eddie Bauer and Pacsun. Two people familiar with the sale said that Yale University did not expect to sell all its shares.
Kinmen Shares is part of its core portfolio and is one of the assets that bankers most want to sell.
Evercore's bankers also provide stakes for Insight Partners and General Catalyst. According to two people familiar with the deal, at least one stake marked as a “sweetener”, Clayton, Dolbyllier and Rice will not be sold because Yale will be able to get the price they need on other shares.
Yale University has also been selling nine funds managed by Bain Capital, with a total value of about $1 billion. A familiar with the deal said the school is about to sell about $500 million in Bain shares.
