Yale's Levin on the Age of Diminishing Endowments - WSJ.com

Yale's Levin on the Age of Diminishing Endowments - WSJ.com:

"University endowments once invested primarily in stocks and bonds. Yale's longtime chief investment officer, David Swensen, pioneered a new strategy that found better returns in less traditional vehicles like hedge funds, private equity partnerships and real estate. The Swensen approach produced a 16% average annual return the past decade through last June. But the steep and sudden drop has left schools heavily invested in assets that can't be quickly sold for cash.

An academic economist who sounds as if he knows his school's finances as well as anyone here, Mr. Levin defends the so-called Yale Model against emboldened critics. 'We made huge excess returns on the way up. When it's all over and things stabilize I think we'll find the overall long-run performance [of the endowment] is better than if we didn't.'"