Ivy League endowments have killed the Yale Model. So what comes next?
Ivy League endowments used to follow the ‘Yale Model’ of investing heavily in private assets. But this model’s success has undermined its ability to provide good returns, which has triggered a divergence among these eight funds (Sophie Park/Bloomberg)
After decades of convergence around a shared investment playbook, Ivy League endowments are increasingly expressing sharply different views on risk — even as returns across the group remain tightly clustered.
For the year ended June 30, most Ivy League institutions posted returns of around 11–12 per cent: slightly better than the MSCI World which returned 7 per cent during that period.
But beneath the surface there is a growing divergence in how Ivy League chief investment officers are responding to elevated valuations, liquidity considerations and long-term uncertainty.
The ‘Yale Model’, with its belief that liquidity is damaging to returns and therefore private assets should be preferred, dominated endowments for years. But it has lost its grip.
At one end of the spectrum, Yale remains steadfast in its commitment to private equity and alternatives but at the other end Columbia, Brown and Cornell are more sceptical.
Part of this stems from the new federal excise tax imposed by the One Big Beautiful Bill Act which Donald Trump signed into law last year and which has been referred to as an “endowment tax” since it will be largely imposed on private research universities.
Several institutions used to pay 1.5 per cent but now face rates up to 8 per cent, pushing boards and investment committees to rethink liquidity, timing, and cash flow.
Columbia University has leaned into public markets. Its $15.9bn endowment bumped global equities up four percentage points to 35 per cent while raising cash to 3 per cent.
Kim Lew, president and chief executive of Columbia Investment Management Company, said the moves reflected a belief in innovation-driven growth rather than a full pivot to illiquidity.
“Our strong belief in the culture of innovation in the US, coupled with the company-building expertise resident in many private equity firms, strengthens our commitment to investing in private markets, while maintaining a high bar for investing,” Lew said.
Of course it helps that global public markets are now so concentrated around the US in general and American tech stocks in particular.
Cornell’s $12.4bn endowment, which returned 12.3 per cent, has taken a slower approach, gradually raising allocations to both public and private equity.
Harvard, on the other hand, has gone after higher-risk, higher-return assets. Its $56.9bn endowment returned 11.9 per cent after boosting private equity by two points to 41 per cent while trimming hedge funds and bonds.
Its exposure to private equity is now one of the highest in the Ivy League.
The Yale Model was developed by David Swensen, who was chief investment officer at Yale from 1985 until his death in 2021.
His 2000 book Pioneering Portfolio Management described his model as an alternative to modern portfolio theory proposed by Harry Markowitz in the 1950s.
Yale says its model “promotes a long-term approach that prioritizes partnerships with the best investment managers to create a portfolio that is equity-oriented and diversified across asset classes”.
In practice this means a heavy skew towards private equity.
But James Adams, senior director of learning content and experience of CFA Institute, said: “I’ve got David Swenson's book on my shelf. One of the things about the Yale model is David was highly successful, not only in framing this properly, but also in his timing.
“As we always say in life, not just finance, timing is everything. So as a pioneer there weren’t a lot of competitors that were going after these types of assets.”
But Adams said the model’s success is now undermining itself.
He said: “This has spread far and wide among endowments. It is also spread far and wide among consultants.
“Long story short, this became a very crowded field following the financial crisis. Why? Rates are low, people are stretching for return. People pile into a market and now, a few years later because it takes time for private market value to work its way through the system, the chickens are coming home to roost.
“Some not-so-great investments are being marked down, they're being sold, this is a little bit like the pendulum swinging the other way.”
Indeed both Yale and Harvard have tried to sell some of their private equity holdings last year.
Colin Haton, principal on NEPC’s endowment and foundation team, said these transactions reflected both tax timing and broader portfolio trends. “It made a lot of sense to realise gains in 2025 before they’d be taxed at 8 per cent instead of 1.5,” he said. “But we’re also seeing secondaries become more commonplace as a portfolio management tool. Smart CIOs are looking at pricing and saying, ‘Maybe I can get more from this now on a go-forward basis.’”
Harvard has also taken a visible step into digital assets, holding $442.9mn in BlackRock’s iShares Bitcoin ETF. Though a small slice of the portfolio, it shows growing comfort among elite endowments with crypto exposure through mainstream financial vehicles.
Brown is at the opposite end of the risk spectrum but it has also made a small move into BlackRock’s bitcoin ETF.
Its $8bn endowment returned 11.9 per cent after cutting public equity by 2.6 percentage points to 10.4 per cent, citing high valuations and AI-related speculative activity.
Brown’s real assets portfolio remains heavily weighted toward digital infrastructure, described as a “picks and shovels” approach to capturing AI-driven growth.
Dartmouth’s $9bn endowment, which returned 10.8 per cent, went yet another way: upping global equities and hedge funds while trimming private equity, venture capital, real assets, and fixed income. Its team pointed to a rebound in public equities and optimism around IPO activity, especially in AI sectors, with hedge funds providing lower-beta returns.
“You want the risk level and liquidity needs of your endowment to match what the potential needs of the institution are,” Haton said.
“If you think of it like a perennial garden, something’s always in bloom. You want to have something that’s performing long-term.”
The divergence reflected a reassessment of what prudence means for endowments.
Adams said endowments had been “shaken at their core” by changes to taxation and shifts in the political environment - with an administration in Washington DC which has been openly hostile towards colleges.
“If you are an endowment chief investment officer, you have to be asking yourself ‘what do I need to be prepared for now that I didn’t expect at this time last year?,” he said.
The shifts suggest that the Ivy League is no longer united around a single definition of prudence. Some institutions are embracing liquidity and public markets to capture near-term opportunity and flexibility; others are retreating from listed equities in favor of private capital, credit and specialized strategies.
Even the emergence of bitcoin ETFs across several portfolios appears less a speculative bet than a signal of comfort with new forms of market infrastructure.
The Yale Model once set the standard for institutional investing but the Ivy League’s endowments are increasingly charting their own paths — splintered in how they choose to take risk but ultimately ending up at a very similar place.
In fact a close examination of the graph above suggests the trend line dips marginally down as private equity exposure goes up.
We’re not sure what the model that’s called.