Category Archives: endowment

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5 Top Unis Follow Yale Down Crypto Investment Path

Harvard University, the Massachusetts Institute of Technology (MIT), Stanford University, Dartmouth College, and the University of North Carolina (UNC), have all made investments from their endowments into at least one crypto fund. These are some of the highest caliber universities in the United States, all with endowments in excess of USD 1 billion, and can be considered institutional investors. These five universities follow the lead of Yale University, which invested some of its USD 30 billion endowment in two crypto funds, Paradigm and Andreessen Horowitz.

It was reported that David Swensen runs Yale’s USD 30 billion endowment, whose choices are copied by institutional investors worldwide. That appears completely true, with the sudden investment of five other major United States universities into crypto. Harvard University has the biggest endowment in the United States at USD 36 billion. MIT has an endowment of USD 15 billion, Stanford University USD 25 billion and UNC USD 3 billion.

These endowments represent a significant amount of money relative to the total crypto market cap of USD 203 billion as of 11 October 2018. Of course, only a small fraction of these endowments have been invested into crypto but if successful then more will likely be invested. Now that these academic heavyweights have invested into crypto, it is likely that other endowments across the United States will soon diversify into crypto, as well as other institutional investors.

The entrance of major universities into crypto investment is one of the first positive confirmations that institutional investors are dipping their toes into the crypto space. Institutional investment has been hyped as the likely cause of the next big crypto rally. The currently low crypto prices, with Bitcoin sitting near USD 6,000, represents an opportunity for institutional investors to buy in and get the most bang for their buck.

Jon Victor, the journalist who originally broke this news, says, “A move by endowments into funds that will directly bet on cryptocurrencies signals a major shift in investor sentiment toward the asset class, in the same way that institutions over the past decade became more willing to invest in private tech companies. Backing from such closely watched institutions could help validate cryptocurrencies, which are still considered too risky by many institutional investors.”

 

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Yale Invests Portion of $30 Billion Endowment in Crypto Hedge Funds

The crypto space has been waiting for institutional investors to enter the market and now, confirmation has come that at least one major institutional investor has jumped into the crypto market. Yale University has the second largest endowment in the United States at USD 30 billion, just behind Harvard’s USD 36 billion endowment. The Yale endowment has invested an undisclosed sum of money into crypto hedge funds run by Paradigm and Andreessen Horowitz.

Yale’s fund is managed by David Swensen, who has a reputation for being a pioneer in institutional investment. Other university’s endowment managers have been watching the movements of David Swensen for decades and have been trying to copy his strategies. Over the last 20 years, Yale’s endowment has seen an 11.8% return per year.

A survey conducted by NEPC in February 2018 indicated that 96% of endowments and foundations don’t invest in crypto. However, this could change now that Swensen has begun to invest Yale’s endowment into crypto, potentially unlocking a fraction of the USD 550 billion of endowments in the United States into the crypto space. To put this in perspective, Bitcoin’s market cap is only USD 114 billion as of 5 October 2018, with the total crypto market cap being USD 219 billion. Therefore, if Yale’s endowment finds success investing in crypto, it could unleash a relatively large amount of capital into the crypto space in the future.

The specific crypto hedge fund Yale’s endowment invested in is Paradigm, a USD 400 million crypto hedge fund started by Coinbase co-founder Fred Ehrsam, former Sequoia Capital Partner Matt Huang, and former Pantera Capital employee Charles Noyes. Also, Yale’s endowment invested in the USD 300 million crypto hedge fund started by Andreessen Horowitz.

Although the exact amount that Yale’s endowment investment in crypto is unknown, it is known that 60% of the endowment will be put into alternative investments in 2019, which includes Venture Capital, Hedge Funds, and leveraged buyouts. Also, a previous study by Yale University found that 6% of investment portfolios should be invested in Bitcoin.

 

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