The Yale model is probably “true over time. But in calendar ’08, it’s exactly wrong. The less liquid you are, the more you’re getting hurt.
Cooper Union’s endowment is going to be flat or slightly up in its fiscal year ending today. In an article in today’s Wall Street Journal (“One College Sidesteps the Crisis” (subscription required)) that reviews how they did it, John Michaelson, who heads Cooper’s investment committee, criticizes the “Yale Model” of David Swensen which has been so highly praised in recent years, calling it “deeply flawed”.
Swensen, who advocated alternative investments like hedge funds, private equity and real estate, is a rock star. But his approach has not been sucessful of late with Swensen recently saying Yale’s endowment will be down 25% in the fiscal year ending today (for example, see this profile of Swensen: “Cash Me If You Can”, Portfolio Magazine, April 2009; also see “Ivy League Endowments Finally ‘Dumb'”, The Wall Street Journal, June 30).