Key Takeaways
- • Yale is negotiating the sale of nearly $3 billion of its private equity portfolio on the secondaries market, according to Yale Daily News, in a transaction code-named "Project Gatsby."
- • The deal would be Yale's first-ever sale on the secondaries market, which the Yale Investments Office characterizes as a standard portfolio management tool rather than a strategy shift.
- • Yale expects the sale to close at a discount of less than 10 percent to current market value, with Evercore advising on the process for months.
- • The sale comes as the U.S. Senate considers a budget bill that would raise the endowment tax on Yale's investment income from 1.4 to 21 percent, and as the $41.4 billion endowment has underperformed since 2022.
- • Yale held more than $20 billion in leveraged buyout and venture capital funds as of June 30, 2024, with roughly 95 percent of the endowment in alternative assets.
Summary
Yale is negotiating the sale of nearly $3 billion of its private equity portfolio on the secondaries market, according to the Yale Daily News. Marcella Rooney, a spokesperson for the Yale Investments Office, said the transaction, code-named "Project Gatsby," would convert private equity assets into liquid assets for reinvestment. Rooney characterized the move as portfolio management rather than a change in investment strategy, stating, "This is not a 'break glass in case of emergency' sale." The deal would mark the university's first-ever sale on the secondaries market, where investors buy existing fund stakes from other investors rather than directly from private companies.
The timing has drawn attention. The sale comes as the U.S. Senate considers a Republican budget bill, already approved by the House of Representatives, that would raise the tax on Yale's endowment investment income from 1.4 to 21 percent. Rooney said discussions about selling parts of the portfolio began as early as the third quarter of 2024, despite recent speculation linking the move to federal tax threats and slowing endowment returns. Evercore has advised Yale "for months" on the potential sale, though Rooney declined to specify how many. Rooney expects the sale to close at a discount of less than 10 percent.
Yale's $41.4 billion endowment grew modestly in fiscal year 2024 but has underperformed since 2022. Its 10-year return of 9.5 percent ranks second among Ivy League peers, yet returns have not reached the 8.25 percent threshold needed to sustain current spending for the past three fiscal years. Administrators have announced a "far more constrained" budget for fiscal 2026 and implemented cuts to faculty hiring, salary increases and construction projects. According to the university's financial report, Yale held more than $20 billion in leveraged buyout and venture capital funds as of June 30, 2024, and roughly 95 percent of its endowment is invested in alternative assets.
Experts interviewed by the News offered differing views. Joshua Cascade, a professor of private equity at the Yale School of Management, said the sale may reflect Yale's view that private equity is entering a prolonged downturn, calling the current cycle "in many ways worse than the Great Financial Crisis." He said the sale is being executed at only a slight discount to buyers flush with cash and described it as "exactly what I would do." John Longo of Rutgers Business School speculated that federal tax threats may have factored into the decision. Howard Bunsis of Eastern Michigan University, who has analyzed over 100 universities' finances, argued Yale continues to generate more income than it spends, maintains low debt, and holds a triple-A bond rating, saying he did not see a problem.
Cascade noted that Yale's move parallels peers. Harvard is reportedly exploring a $1 billion private equity sale, and MIT's endowment, run by former Yale Investments Office director Seth Alexander '95, is researching a potential private equity sale.
The timing has drawn attention. The sale comes as the U.S. Senate considers a Republican budget bill, already approved by the House of Representatives, that would raise the tax on Yale's endowment investment income from 1.4 to 21 percent. Rooney said discussions about selling parts of the portfolio began as early as the third quarter of 2024, despite recent speculation linking the move to federal tax threats and slowing endowment returns. Evercore has advised Yale "for months" on the potential sale, though Rooney declined to specify how many. Rooney expects the sale to close at a discount of less than 10 percent.
Yale's $41.4 billion endowment grew modestly in fiscal year 2024 but has underperformed since 2022. Its 10-year return of 9.5 percent ranks second among Ivy League peers, yet returns have not reached the 8.25 percent threshold needed to sustain current spending for the past three fiscal years. Administrators have announced a "far more constrained" budget for fiscal 2026 and implemented cuts to faculty hiring, salary increases and construction projects. According to the university's financial report, Yale held more than $20 billion in leveraged buyout and venture capital funds as of June 30, 2024, and roughly 95 percent of its endowment is invested in alternative assets.
Experts interviewed by the News offered differing views. Joshua Cascade, a professor of private equity at the Yale School of Management, said the sale may reflect Yale's view that private equity is entering a prolonged downturn, calling the current cycle "in many ways worse than the Great Financial Crisis." He said the sale is being executed at only a slight discount to buyers flush with cash and described it as "exactly what I would do." John Longo of Rutgers Business School speculated that federal tax threats may have factored into the decision. Howard Bunsis of Eastern Michigan University, who has analyzed over 100 universities' finances, argued Yale continues to generate more income than it spends, maintains low debt, and holds a triple-A bond rating, saying he did not see a problem.
Cascade noted that Yale's move parallels peers. Harvard is reportedly exploring a $1 billion private equity sale, and MIT's endowment, run by former Yale Investments Office director Seth Alexander '95, is researching a potential private equity sale.
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