Yale, the university-turned-hedge-fund, bet some of its $29B endowment on crypto

Yale, the most risk-embracing investor in Big Ed, invested a chunk of its $29B endowment in a crypto fund called Paradigm.

October 8, 2018

Yale University, which has the 2nd largest endowment of any US school, invested in a fund called Paradigm launched by one of the co-founders of crypto exchange Coinbase and a partner at Sequoia.

Assisted by huge tax advantages, US university endowments have become massive. And Yale’s David Swensen — famous for making risky bets — has decided to go crypto.

Hedge funds with universities attached

Yale’s $29B endowment is 2nd only to Harvard — which has around $39B (if Harvard were a hedge fund, it would be the 5th largest in the country). But the Ivies aren’t alone: 96 American colleges and universities have $1B+ endowments (totaling $431B). 

While hedge funds returned 8.5% in 2017 (the best outcome in 4 years), endowments returned 12.2% thanks to huge tax breaks for universities (which are nonprofits).

Harvard has historically managed its massive endowment conservatively. But thanks to Swensen, Yale is all about diversifying.

The ‘Warren Buffett of endowments’ is pretty alt

Swensen, AKA “The Sage of New Haven,” has invested Yale’s money across such a wide variety of assets that investors now call alternative endowment investing “the Yale model.”

Swensen decided to start investing in “alternative” assets like real estate, natural resources, VC funds, and hedge funds — basically turning Yale’s endowment into a ‘fund-of-funds’ with rock-bottom tax obligations. 

Now, Swensen will be placing Big Ed’s first real bet on crypto. Paradigm has raised $400m, but crypto’s rocky year means the investment still comes with a side of risk… just the way Swensen likes it.

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