Yale Case Solution - Investment Management

Finance: “The study of applying specific value to things that we own, the services we use, and the decisions we make.” (Cornett, Adair, & Nofsinger, 2016, p. 5).

1. How has the Investment Office selected, compensated, and controlled private equity fund managers? What explains the differences between their strategy in private equity with that in other asset classes (e.g., real estate)?

The Yale Endowment is known in the financial industry as a pioneer in using a combination of innovative asset allocation and active management to produce impressive long-term performance. In fact, the Endowment produced a 17.8% average annual return, net of fees, in the ten-year period ending June 30, 2007.1 This performance is particularly impressive given that, in recent years, the Endowment portfolio has carried less than a 40% weighting in equities. Instead, under the leadership of Chief Investment Officer Dave Swensen, the Yale Investments Office

With Reference to this statement, describe, discuss and illustrate the principles of portfolio theory. Your essay should include coverage of the Markowitz Efficient Frontier and the Capital Market Line.

(c) Because one of HMS’s goal is to preserving the real value of endowment. Nominal return may reflect much lower real value of endowment because of inflation. So only the real return can make sure that Harvard does not lose money.

Putnam Investments faced difficulties in 2003 when it became a target of scrutiny investigation, because the firm was involved in the issues of market timing and late trading. By then, Lawrence Lasser had been the CEO of Putnam for almost 17 years. The culture of the company was built around hierarchy, individual achievement, and aggressive, sales-driven growth . Lasser’s daily small actions did affect the culture of the company and gradually the weak culture led to the difficulties faced by the firm in 2003. One of the most representative examples is the investment philosophy under Lasser’s leadership. Lasser focused on the short-term financial returns and immediate requisition of new customers. Employees were encouraged to do whatever

Miller is an adherent of fundamental analysis, an approach to equity investing he had gleaned from a number of sources. Miller’s approach was research-intensive and highly concentrated. Nearly 50% of Value Trust’s assets were invested in just 10 large-capitalization companies. While most of Miller’s investments were value stocks, he was not averse to taking large positions in the stocks of growth companies. Overall, Miller’s style was eclectic and difficult to distill.

1. Adams espouses a “market first” analysis of opportunity by looking for discontinuities. Is this substantive or window-dressing? Do the four types of discontinuities represent applicable guidelines? Are they comprehensive, or are there other discontinuity templates that a venture investor would find useful?

Discuss Buffett’s analysis of the junk bond failures of the 1980s.What is Buffett’s view of the role to be played by investment bankers?

Instead of relying solely on external management, they allocate 68% of their endowment to internal management and the remaining 32% to outside asset managers. In order to do this, HMC employed 38 investment professionals and 148 other employees whose jobs were solely to manage the $19 billion dollars in total assets, of which $15.1 billion were endowment funds. This management strategy generated expenses of around $93 million dollars per year (49 basis points), and produced a real return of 11.3%, after expenses. This method of investment costs about 19 more basis points than a passive strategy and about 51 basis points cheaper than a typical active investment strategy using 100% outside managers. Harvard University opted for this strategy because it is cheaper than a traditional active management strategy while still allowing them the ability to adjust their risks taken and expected returns in order to remain on the “efficient frontier” of what return was required to meet their internal institutional goals.

1. What are the financial issues facing the Hewlett Foundation (HF)? In particular, is HF’s newly proposed asset allocation policy adequate to meet the foundation’s long-term spending goal of sustaining a long-term real (or inflation-adjusted) payout ratio of 5%, while preserving capital in real terms? Is it adequate to meet its short-term objective of maintaining consistent spending without sharp fluctuations?

My experience at Villanova, both as a research fellow and a student was formative of my fascination with investments, hedge funds, and mutual funds. My original interest sparked while working with Dr. Velthuis and performing literature reviews on effects of corporate activism on stock prices, and size effects on hedge fund returns. Since then, classes in Portfolio Theory and

The combination of five factors in Yale’s investment philosophy plays an important role to Yale’s successful investment performance. However, among the five factors, the most critical and non-replicable factors are Yale’s ability to identify and invest in inefficient markets and to hire superior managers with aligned incentives; all of which came from expertise and years of experience in the industry. David Swansen’s expertise, in particular, plays a big role.

In 2005, the vice president, chief investment officer, and their investment team met in order to compose a new asset allocation policy for the foundation’s investment portfolio worth $6.4 billion. One of the proposal’s suggestion was to reduce the overall exposure of the investment portfolio to domestic public equities. The proposal would also increase the allocation to absolute return strategies (with an “equitizing” and “bondization” program) and to TIPS. The new policy would slightly increase the Sharpe ratio of the foundation’s portfolio. They also needed to make a decision on a recommendation to pledge about 5% of the total value of the portfolio to Sirius V, which was the latest fund that specialized in global distressed real estate investments.

Ethical investment funds are spreading all over the world and research investigation on it undertaken small number of ethical of the UK and US ethical funds. For example in 2010 UK ethical investment hits record high of £9.5 billion, which represent the approximately three quarters of a million investors in ethical funds. (EIRiS News Release London, 1 June 2010). In this study considers ethical and conventional investment funds in Europe from