Yale Endowment

Yale has an endowment that tops $25 billion.

Yale University ranks behind only Harvard University and the University of Texas system for the size of its endowment. As of 2015, Yale’s endowment, operated under the stewardship of David F. Swensen, stood at about $25.6 billion with a ‘b’. That’s quite a lot of money. And so we read with great interest a piece by Janet Lorin in “Bloomberg” on some of the school’s investments. The piece, entitled “Yale Finds Itself on Both Sides of Employee’s Fight for a Home,” focuses on how the university helped a custodian, Frank Douglass, who has worked at the university for 27 years, buy his home in New Haven, Connecticut. Yale helps its employees buy homes. It seems simple. But things get a bit trickier.

As Douglass expresses in the piece in “Bloomberg,” “‘Yale helped me buy my house, and now they’re investing in the company that’s trying to take my house from me,’ said Douglass, who has worked for the Ivy League university for 27 years, starting out as a pot washer in one of the dining halls. ‘I just don’t get it.'” And how exactly does Yale find itself on both sides of Douglass’ situation? As Lorin writes, “About 30 percent of Yale’s $25.6 billion endowment is targeted for investment in private equity. One of its fund managers, Fortress Investment Group LLC, owns more than half of Nationstar Mortgage Holdings Inc., which services Douglass’s mortgage. A hedge fund Yale invests in, Kingstown Capital Management, has a stake in another servicing company, Ocwen Financial Corp.”

While it is certainly the job of the investment officers of all endowments at colleges across America to make a return on the funds they run, it is also the responsibility of these fund managers to make investments that do not run counter to the principles of the universities they represent (e.g., when many universities across America from Harvard to Columbia to Berkeley to Smith divested from apartheid-era South Africa). But with so much of the money of universities invested in private equity, it can be quite difficult to earmark where precisely this money is invested. Sometimes, it gets invested in mortgage companies that are under investigation for unfair practices, like in the case of the company that owns Douglass’ mortgage.