Yale’s donation sells private equity deployment when Trump focuses on Ivies

The famous donation of Yale University has tried to discharge one of the largest portfolios of private equity investments ever in one sale, a movement that reflects the pressure on both Wall Street and higher education under the Trump administration.

The Ivy League School has searched buyers for a maximum of $ 6 billion in private equity and venture funds, according to three people who have been informed about the sales process, amid uncertainty about federal financing and the reality that many of these investments did not achieve the too large returns that Yale had expected.

Yale is now close to completing a sale of around $ 3 billion from the portfolio and sells the assets with a light discount, one of the people said.

“This is a big problem,” said Sandep Dahiya, a professor in finance at the University of Georgetown, who has done research into the performance of donations. “The investor who was the main architect of investing in the private equity markets moves in his horns.”

For decades, Yale is considered a pioneer for moving his investments away from shares and bonds to long-term companies managed by private equity and venture capital companies. But last year, Yale’s $ 41 billion donation generated Return of only 5.7 percent, who find out the S&P 500 and other important indexes. Yale said his return of 10 years is 9.5 percent.

Investments in private equity generally generate cash for donations and other investors after they have invested or have sold or must have sold or have sold or have sold them in public. But recently, private equity and daring companies, which make up about half of the Yale donation, have difficulty selling their interests in companies and giving back cash to investors. That has sent back to back.

Yale’s search to leave investments in both well-known companies such as Bain Capital and less well-known such as Golden Gate Capital, Clayton Dubilier & Rice and Insight Partners, is a sharp U-turn for a donation that has long processed the value of Private Equity and other long-term investments.

Knowing that some interests would be more difficult to sell than others, the bankers of Yale potential bidders offered two separate lists with funds; “Core” funds, those they wanted to sell the most; And ‘sweeteners’, the better performing, according to two of the people who have informed the sale.

Although buyers would only receive a small discount of about 5 percent on the use of private equity, the fact that Yale is willing to sell assets that were once very desirable at less than full value the challenges of the industry.

The sale comes at a critical moment for universities. While President Trump Yale has saved the kind of punitive financing reductions that he has leveled against other Ivy League schools such as Harvard, Yale is struggling with a decrease in federal investigative financing that have broadly attracted higher education. Republicans in the congress have also proposed steep tax increases for donations.

Yale is on schedule to spend around $ 2.1 billion on the donation in 2025, which is good for just over a third of the annual budget.

In a statement to the New York Times, a representative for the Yale Endowment recognized the sale, but called Private Equity ‘a core element of our investment strategy’. The statement added: “We do not reduce our long -term goal to private equity.” The university said it also wants to invest in other private equity companies.

Yale’s bankers tried to keep the process discreet by giving the sale the codename ‘Project Gatsby’. (Two of the main characters in the novel by F. Scott Fitzgerald in the roaring 1920s went to Yale.) But Yale’s Zet is generally considered a harbinger of Wall Street.

At least two other large universities are preparing to sell some private equity assets, and dozens of us and Asian pension funds also look at outputs.

Lawrence Siegel, the former director of research at the Ford Foundation, called the move of Yale “a wake-up call” for investors.

“It is also Yale who tries to come out for everyone else,” said Mr. Siegel.

Swensen -Model

When David Swensen, a former banker of Lehman Brothers, came to Yale in 1985 as Chief Investment Officer, the donation of the university was appreciated With around $ 1.3 billion (Harvard had $ 2.7 billion).

In 2021, the year that Mr. Swensen diedYale’s donation swollen Up to $ 42.3 billion, behind Harvard only billions for almost any other university donation.

To achieve that, Mr Swensen shifted the investments of Yale from a traditional portfolio of 60 percent shares and 40 percent bonds. After getting to know fund managers in private equity and risk companies, Mr. Swensen moved a relatively large Slug of Yale’s donation in long-term assets, which often invested in those funds for decades.

Other universities looked at the return of Yale and started following the Swensen model, as it became known.

Yale’s early affection for private equity provided the perfect advertisement for an industry that wanted to attract new investors.

“Do you want to be smart like Yale?” Ludovic Phalippou, an economist at the University of Oxford, said when describing the field.

University donations now invest on average approximately 17.1 percent of the assets in private equity funds, according to studies of the National Association of College and University Business Officers. That is an increase of only 5.4 percent in 2007 before the financial crisis.

Universities and private equity companies have developed a symbiotic relationship. Endowments usually pay private equity companies about 2 percent of the money they manage and 20 percent of the profit they generate.

Those reimbursements helped hear Mint of billionaires, many of whom are in university boards and make large donations to the schools.

Yale’s senior trustee, for example, Joshua Bekenstein, has worked in Bain Capital since its foundation in 1984, four years after he graduated from Yale. The Boston-based company was one of the earliest that jumped into the buy-out industry. It took companies such as Dunkin ‘Donuts, Clear Channel Communications and Gymboree, added debts and then tried to sell for a profit. The Gymboree children’s clothing store has seven years after Bain has requested the bankruptcy.

Bain now manages $ 185 billion, including at least $ 1 billion for Yale.

For more than a decade after the financial crisis, American private equity companies on paper on paper have reliably generated on paper in the middle of the teenagers, according to the pitchbook of the data provider. But the companies generated an average return below 10 percent in 2022 and 2023, and just over 10 percent in 2024.

Another challenge: making deal has been slow for several years, and private equity companies have difficulty selling interests in companies and to return cash to investors at levels that have been reached in previous years. Despite the optimism that the second Trump administration would stimulate a revival of Deal, the volatility around rates have wary.

In 2024, the companies sent back around 15 percent of the value of their funds to investors, compared to between 25 and 35 percent in previous years, according to PitchBook data.

The extraction returns come after private equity companies, from 2021 to 2024, recordcums have increased from pensions, donations and sovereign wealth funds, PitchBook -data shows.

Steven Meier, Chief Investment Officer for the New York City Retirement Systemacked that return for private equity “was not great”.

The system, which manages an investment portfolio of $ 280 billion for the pensions of teachers, firefighters and other public employees, has just sold $ 5 billion of its interests to Private Equity companies. Mr. Meier said that the city will continue to invest in private equity, but wants to pay lower costs.

He added that the recent returns from the funds to pensions and donations have also been ‘disappointing’.

Project Gatsby

When Yale’s bankers at Evercore Partners started shopping in the Endowment’s private equity portfolio in April, they did not disclose the identity of the seller.

But they left an indication: they called the sales ‘Project Gatsby’. ‘

Bidders was asked to select funds from a combination of the “sweetener” and the “core” pool of assets and to name their price by 6 May, in which Yale’s bankers sought a closure of 30 June, viewed by the New York Times according to sales documents.

Some details of the sale of Yale were previously reported by Secondaries Investor and Bloomberg.

The largest position that Yale has shopped is an interest of around $ 600 million in a 2007 fund of Golden Gate Capital, a private equity company established in San Francisco Usually known For investing in retailers such as Ann Taylor, Eddie Bauer and Pacsun. Two people who are familiar with the sale said that Yale did not expect to sell the whole interest.

Golden Gate’s importance was launched as part of the core portfolio, one of the assets that the bankers wanted to sell the most.

Evercore’s bankers also offered interests in Insight Partners and General Catalyst. At least one pole that was labeled as a ‘sweetener’, it was not expected that Clayton, Dubilier & Rice, would be sold because Yale could get the price it wanted for other bets, according to two people who are familiar with the sale.

Yale has also offered to sell nine funds managed by Bain Capital, with a total value of around $ 1 billion. A person who is familiar with the deal said that the school is about to sell around $ 500 million to that bain deployment.