If there’s one thing Ivy Leaguers love, it’s promoting from within. On Tuesday, Yale University tapped 36-year-old alumnus Matthew Mendelsohn to lead the school’s $31-billion endowment.
Mendelsohn, who graduated Yale with a BA in physics in 2007 and joined the endowment straight out of college, assumes the helm from David Swensen. The legendary investor, who led the endowment for 36 years and pioneered how universities do business, passed away in May.
Tough Act To Follow
Swensen’s legend is hard to overstate. He completely revolutionized the management of university endowments by placing enormous bets on hedge funds, private equity, and venture capital firms, which turned out to produce returns rivaling Wall Street’s best:
- The Yale endowment’s average annual return of 12.4% over the past thirty years is among the elite in the global investment industry. When Swensen took over in 1986, the now $31-billion endowment was worth just $1.3 billion.
- The transition to such a young successor is an indication of Swensen’s faith in Mendelsohn, who currently oversees the endowment’s prized VC investments, which represent roughly 25% of its total investments and have returned an average of 22% per year over the past decade.
“All-Yale, responsible for the highest-performing asset group in the portfolio, and about 36 years old. A bell-ringer,” Charles Skorina, an investment industry headhunter, told the Financial Times of Mendelsohn.
Tough Time to Take Over: The mid-30’s Yale alum has the pedigree to excel, but is stepping into a tough spot. With asset prices at all-time highs following unprecedented central bank stimulus, investment group AQR estimates a traditional portfolio with a 60% to 40% split in equities and fixed income will return just 2.1% annually for the next 5 to 10 years.