Yale’s 36-Year-Old Endowment Chief Was Molded in Swensen Way
(Bloomberg) -- Yale University had such a successful decades-long run with David Swensen, its late chief investment officer, that it’s only natural the school wanted someone of the same mold to take over its $31 billion endowment.
It didn’t have to stray far.
In Matthew Mendelsohn, Yale selected one of Swensen’s many proteges. His only job since graduating from the New Haven, Connecticut-based Ivy League school 14 years ago has been learning from the legendary money manager. Swensen began leading Yale’s endowment in 1985 -- the same year the 36-year-old Mendelsohn was born.
For Yale, no one can ever truly replace Swensen, who oversaw explosive growth in the endowment’s assets over more than three decades and revolutionized how universities and other institutional investors manage money. Yet Mendelsohn, who begins Sept. 1, had a front-row seat for more than a decade, experience managing venture investments that account for quarter of Yale’s assets and deep roots on campus.
“One of the great things about going with a young leader is the potential for a long runway, just like David,” Richard Levin, a former Yale president, said in an interview.
Swensen has had such “an extraordinary record of training leaders in the investment world and with Matt, I expect this to be no exception,” said Levin, adding that Mendelsohn was “impressive” at presentations he attended.
Yale’s endowment was transformed by Swensen through savvy investments and became one of the best-performing nationwide. He was a pioneer in diversifying the portfolio -- adding private equity, hedge funds and real estate while moving away from plain vanilla assets. The result: Yale ranks first among its Ivy League peers over the past decade with a 10.9% average annual return, according to data compiled by Bloomberg.
Mendelsohn’s venture-capital portion of the endowment has fared even better, returning an average of 21.6% over the past 10 years. That stewardship, along with winning Swensen’s confidence, puts him in a good position to succeed, Charles Ellis, a former chairman of the Yale investment committee, said in an interview.
“The easy view would be that Matt is relatively young,” said Ellis, a longtime friend of Swensen’s. “A better view would be that he’s got a long time ahead of him and has been immersed and disciplined in thought processes that were so important to David Swensen’s great success.”
Swensen, who died from cancer in May, left a legacy of proteges across the investing world -- most noticeably within college endowments. Yale investment alumni now lead many of the largest funds, including those at Princeton University, Stanford University, the Massachusetts Institute of Technology and the University of Pennsylvania.
Mendelsohn, like Swensen, grew up in the Midwest before attending Yale. The St. Louis native graduated with a physics degree in 2007 and joined the investments office that year. He lives in the New Haven area with his wife, Lauren Martini, who earned a Ph.D. from Yale, and their two children.
He will take over after what’s likely to be a blockbuster year for the fund and its peers. The median college endowment returned 27% for the year ended June 30, the strongest performance since 1986, according to data from Wilshire Trust Universe Comparison Service.
Mendelsohn will also have to confront rapidly evolving markets, with booms and busts in cryptocurrencies and special purpose acquisition companies, a crackdown in China and other investors flooding hedge funds and private equity firms with cash in an attempt to capture higher returns. Meanwhile, university fund managers face pressure from activists, students and faculty to scrap controversial assets and diversify their ranks.
Yale -- and Mendelsohn -- will follow the Swensen model to guide the second-largest U.S. private college endowment through whatever happens in markets. Mendelsohn will lead an office of about 30 professionals.
“David made such an incredible impact on Yale and the broader world of institutional investing,” Mendelsohn said in response to emailed questions. “I have a long way to go before I begin to approach the contribution that he made.”
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