Yale’s low-key new fund leader embodies bold investment style

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Yale University Update

Learn how a young, low-key and geeky Midwesterner got a respected job following this week David Swenson As the head of the Yale University Endowment Fund, industry insiders pointed out the development of the fund over the years.

Back in 2007-36 years old Matthew Mendelson After earning a degree in physics from Ivy League University, he first joined the Yale Investment Office-less than one-fifth of the bets on private equity and venture capital funds in Yale’s $23 billion endowment fund. At the time, this was considered bold and might even be a bit dangerous.

Today, they account for nearly two-fifths of Yale University’s $31 billion in funding. Together with other untraded and unlisted investments in real estate and other fields, more than half of its capital is located in what is commonly referred to as “Private capital“-Far more than the amount most endowment funds are willing to allocate.

Mendelsohn is responsible for venture capital, 22.6% is the largest distribution to date, and has been working on its private equity in the past.Industry insiders said that when Svensson created a more adventurous donation strategy and Inspire investors During his 36-year tenure, all kinds of people-died of cancer in May.

“It is difficult to distinguish the transformation of Yale University’s portfolio over the past decade from the decision to appoint Matt,” said Scott Cooper, managing partner of Andreessen Horowitz, a well-known venture capital firm invested by Yale University. Er said. “Many investors believe that in the future, returns will increasingly come from the private market. Time will tell whether they are correct, but they are voting with their feet.”

This helps explain the actual reasons why the St. Louis natives get the top positions. But people who know Mendelssohn also describe him as a serious, polite, smart, and extremely calm person. He is good at building relationships with top figures in Silicon Valley and Wall Street, despite his low-key nature.

“Like many people in our industry, he may be a natural introvert and must show an extroverted character,” said an observer. “He is not the kind of person you would sit in a bar late at night and entertain people with stories.”

Others described how Mendelssohn often asked venture capitalists in detail about how their company was organized, instead of asking about personal bets they might make.

“He is really a symbol of Yale’s culture and strategy. Everything has to do with cooperation,” Kupor said. “When they conduct due diligence, they ask me the right questions. They ask about organizational design, decision-making process, overall strategy, company culture, how we adjust incentives, and then we ask our portfolio companies. Many other investors Just ask about our portfolio.”

Yale's endowment fund has beaten competitors in the past decade

Some people who know Mendelssohn say that he is more interested in potentially risky new investments than many of his colleagues at Yale University and other university endowments around the world. For example, under his guidance, Yale University invested in Paradigm, Cryptocurrency The fund has become an important participant in the fast-growing but risky decentralized financial sector.

“Unfortunately, most people in our industry are followers,” said Ryan Akkina, a senior member of the MIT Endowment Investment Team. “Matt is one of the few people in the field of institutional venture capital. They are in a big environment and are very willing to innovate.”

Yale Venture capital The endowment fund stated that in the past ten years, the average annual return on investment was 21.6%. The Cambridge United Venture Fund Index has an annual return of 18.3% for approximately the same period.

In the past 10 years, this has been the main contributor to YIO’s overall annual average return rate of 10.9%. Although this is lower than the 12.4% average of the past 30 years, it easily exceeds the 7.5% average return of US endowments.

The 2020 asset allocation percentage bar chart shows that Yale University invests more actively in private equity and venture capital than most U.S. endowments

Nonetheless, Akkina predicts that Mendelssohn may be ready to experiment with the “Yale Model” that Svenson first established decades ago. He aggressively forays into private equity, venture capital, and hedge funds that were once all the rage strategies. “It was a product of the 80s, 90s, and 2000s,” Akkina said. “Today’s investment landscape is very different.”

Although returns have been largely optimistic during most of the post-crisis era, valuations are now so high that future performance may be weak, forcing many large investors to look for alternatives.

However, many of the former cutting-edge strategies that Svensson originally advocated are now commonplace, making Mendelssohn arguably facing more risky investments than when his mentor first came to the Yale Fund in New Haven, Connecticut in 1985. environment.

David Swenson first established the “Yale Model” decades ago © Yale University, Michael Maslan

“There will of course be challenges for someone managing a portfolio of this size, let alone trying to follow in David’s footsteps,” Mendelssohn said in an emailed statement. “However, I believe our team is ready to meet these challenges. The basic principles of our investment approach are rooted in a very deep and experienced team who are passionate about advancing the mission of Yale University.”

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