Yale University's well-known fund is trying to offload one of its previous portfolio of private equity investments with a single sale so far, a move that reflects pressure on both Wall Street and higher education under the Trump administration.
Ivy League School is seeking buyers for up to $6 billion in stock in private equity and venture funds, according to three people who described the sales process amid uncertainty about the reality that many of these investments are not offering the massive returns that Yale had anticipated.
Yale has now completed sales of its approximately $3 billion portfolio and is selling assets at a small discount, one of the people said.
“This is a big deal,” says Sandeep Dahiya, a professor of finance at Georgetown University, who does research into the fund's performance. “Investors who were the leading architects of investments in the private equity market are pulling that corner.”
For decades, Yale has been seen as a pioneer who turns investments from stocks and bonds to long-term holdings managed by private equity and venture capital companies. However, last year Yale's $41 billion contribution generated just 5.7% returns, falling below the S&P 500 and other major indices. Yale said the 10-year return averages 9.5% per year.
Private equity investments usually generate cash for donations and other investors after selling or publishing the company they invested in. However, recently, private equity and venture companies, which make up about half of Yale's contributions, have struggled to sell their company's shares and return cash to investors. It pushed the return down.
Yale's quest to withdraw investments in both well-known companies like Bain Capital and lesser-known companies like Golden Gate Capital, Clayton Dubilier & Rice and Insight Partners is a sharp U-turn in donations that has long complemented the value of private equity and other long-term investments.
Yale bankers, knowing that some interests are more difficult to sell than other stocks, provided potential bidders with two separate bidders of “core” funds, what they want to sell the most, the “sweeteners”, something with better performance.
Buyers receive only a small discount of around 5% in private equity stakes, but Yale's willingness to sell assets that were once completely and completely wanted, reflects the industry's challenges.
This sale is at a critical time for universities. While President Trump has spared Yale from levelled punitive funding cuts for other Ivy League schools such as Harvard, Yale is working on a decline in federal research funding that has hit higher education widely. Congressional Republicans are also proposing a sharp increase in taxes on donations.
Yale is on track to spend around $2.1 billion from its 2025 donation, accounting for just one-half of its annual budget.
In a statement provided to the New York Times, Yale's donation representatives granted the sale, but they were called private equity and “core elements of investment strategy.” “We are not reducing our long-term goals to private equity,” the statement added. The university said it is also trying to invest in other private equity companies.
Yale bankers have tried to be careful with the process by offering the code name project Gatsby to the sale. (Two of the protagonists of F. Scott Fitzgerald's novel set in Roaring in the 1920s went to Yale.) However, Yale's movement is widely seen as a precursor on Wall Street.
At least two other large universities are preparing to sell private equity assets, and dozens of US and Asian pension funds are also considering exits.
Lawrence Siegel, former research director at the Ford Foundation, has been called the investor Yale move, “Walking Call.”
“It's also about Yale coming ahead of everyone else,” Siegel said.
Swenssen model
When former Lehman Brothers Banker David Swensen joined Yale as Chief Investment Officer in 1985, the university's contributions were valued at around $1.3 billion. (Harvard University had $2.7 billion.)
In 2021, when Swensen passed away, Yale's contributions fell behind Harvard, but swelled to billions of dollars than almost every other university contribution.
To achieve that, Swensen shifted Yale's investments from its traditional portfolio of 60% stakes and 40% bonds. After getting to know fund managers for private equity and venture companies, Swensen transferred the relatively large slugs of Yale's contributions into long-term assets, often investing in these funds for decades.
Other universities saw Yale's return and began following the Swensen model, which became known.
Yale's early love for private equity provided the best advertising for an industry looking to attract new investors.
“Want to be as smart as Yale?” Oxford University economist Ludovic Farippou said he explained the pitch.
According to a study by the National Association of Universities and University Business Officers, university funds currently invest an average of around 17.1% in individual equity funds. This is up from just 5.4% in 2007, before the financial crisis.
Universities and private corporations have built symbiotic relationships. Donations usually pay private equity companies about 2% of the money managed by the manager and 20% of the profits they generate.
These fees helped kill many billionaires' mints. Many of them sit on university boards and donate large sums to schools.
For example, Joshua Bekenstein, a senior trustee at Yale, has been working at Bain Capital since his founding in 1984, four years after graduating from Yale. The Boston-based company was one of the earliest to jump into the acquisition business. They scooped up companies like Dunkin' Donuts, Clear Channel Communications, and Gymboree, added debt and then tried to sell for profit. Jim Bolly, a children's clothing retailer, filed for bankruptcy seven years after Bane bought it.
Bain currently manages $185 billion. This includes at least about $1 billion in Yale.
Over the course of more than a decade since the financial crisis, US private equity companies have reliably generated average returns for mid-teens and high schools on paper, according to data provider Pitchbook. However, companies had average returns below 10% in 2022 and 2023, and exceeded 10% in 2024.
Another challenge: transaction production was slow for several years, and private equity companies had difficulty selling their company's stock and returning cash to investors at the level they reached in the past few years. Despite optimism that the second Trump administration would spur a revival of deal production, tariff volatility has cautiously volatility.
In 2024, businesses returned about 15% of the value of their funds to investors in cash, which is 25-35% over the past few years.
Returns will be made after private equity companies between 2021 and 2024 increase record totals from pensions, donations and sovereign wealth funds, according to Pitchbook Data.
Stephen Meyer, chief investment officer for the New York City Retirement System, admitted that private equity returns are “not great.”
The system manages a $280 billion investment portfolio for pensions for teachers, firefighters and other civil servants, and has sold $5 billion in private equity companies. Meyer said the city will continue to invest in private equity, but is considering paying a lower fee.
He added that the fund's recent return to pensions and donations was “disappointing.”
Project Gatsby
When the Yale banker at Evercore Partners began shopping for donors' private equity portfolio in April, they did not reveal the seller's identity.
But they left a clue: they called the sales project Gatsby.
According to sales documents viewed by the Times, bidders were asked to select funds from a combination of “sweeteners” and “core” pools of assets, and to cite prices by May 6th, with Yale bankers aiming to close on June 30th.
Some details of Yale's sales have been reported previously by Secondary Investor and Bloomberg.
The largest single position Yale has been shopping for is about $600 million in a 2007 fund run by Golden Gate Capital, a San Francisco-based private equity firm known for investing primarily in retailers such as Anne Taylor, Eddie Bauer and Paksan. The two, well-versed in the sale, said they don't think Yale would sell the entire stock.
Golden Gate Stakes were sold as part of their core portfolio, among the assets bankers wanted to sell most.
Evercore's bankers also provided stocks in insight partners and general catalysts. At least one share labelled “sweetener,” Clayton, Dubilier & Rice, was not expected to be sold as Yale managed to get the price he wanted with the other bets.
Yale also offers to sell nine funds managed by Bain Capital, totaling around $1 billion. Those familiar with the deal said the school is on sale at a crisis of about $500 million worth of sales of these Bain Stakes.
