Risk Premiums

“Be like Yale!” Following up on the remarkably strong investment performance of Yale Endowment over the past 20 years, this slogan has become well-known among institutional investors worldwide. While few will publicly acknowledge that they are mimicking Yale Endowment Fund, asset allocation speaks louder than a thousand words. And why not be like Yale? After all, the Yale Endowment grew from $5.8 billion to $22.5 billion in the period from 1998 until June 2007, achieving annual net investment returns of 17.8%.1 However, as Yale Endowment lost an estimated amount of 25%2 of its value over 2008 and more and more investors are trying to invest like Yale does, the question arises as to whether the Yale model has just been a passing phase.