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TheStreet Open House

Ivy League Investing With the Yale Endowment

BALTIMORE ( Stockpickr) -- While the Ivy League may be known for churning out some of Wall Street's most well-respected investors, it may actually be these storied universities' endowments that deserve the most respect. After all, the endowment funds at some of the country's most prestigious schools have boasted some incredible returns over the last few decades -- and few have gained as much attention in the process as Yale University's $16.7 billion fund.

Headed by Chief Investment Officer David Swensen since 1985, Yale's endowment ranks as the country's second-largest academic endowment in the world (trailing only Harvard's mammoth coffers). But Yale's notoriety ranks first, thanks in part to Swensen's strategy for managing endowment funds.

>>Also: Fairholme Makes Big Bets on Financial Stocks

Swensen's approach to endowment investing embraces alternative investments not typically approached by Main Street investors. Liquid investments, he opines, leave returns on the table. To counter that, his funds seek major holdings in illiquid alternatives such as real assets, private equity and workouts (called absolute return investments) designed to tap market inefficiencies. Only a meager 7.5% of Yale's endowment is invested in domestic stocks.

Unfortunately, that strategy failed to impress in 2008 when capital fled illiquid investments and real assets in favor of accessible "quality" holdings. All told, the fiscal year ended June 30, 2009, resulted in a 24.6% loss -- Yale's largest ever.

>>Also: Ken Fisher: Debunking Wall Street's Myths

In the year since, the fund has bounced back, with an 8.9% return on assets last year. While the endowment has continued its practice of avoiding overreliance on domestic equities, you shouldn't underestimate the team's ability to pick stocks; the endowment's stock portfolio beat the broad market by 4.7% last year.

With that, here's a look at some of Yale's holdings per its latest quarterly filing.

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