Pop psychology writer Malcolm Gladwell has the hump over hedge funds again. Now he has taken to twitter to blast Yale University for blowing $480 million on hedge funds last year, while spending just $170 million on its students .
Yale’s endowment spent $480 million paying its hedge fund managers last year and $170 million on its students.
— Gladwell (@Gladwell) August 19, 2015
Except that it didn’t. The New York Times article he was referring to wasn’t actually about hedge funds but was about private equity funds. But that didn’t matter to Gladwell who in his next tweet spluttered:
I was going to donate money to Yale. But maybe it makes more sense to mail a check directly to the hedge fund of my choice.
— Gladwell (@Gladwell) August 19, 2015
Cue the avalanche of #hedgefunds twitter rage.
Ok, so it appears the Yale endowment fund did in fact pay out $480 million to private equity funds – about $137 million in annual management fees and $343 million in performance fees – to manage its $8 billion private equity portfolio. PE typically operates on a 2 and 20 fee structure: 2% for managing the funds, 20% in performance fees, also known as carried interest. Which means Yale is getting a pretty good return on investment.
In fact, the Yale Endowment Fund – which has been under the stewardship of CIO David Swensen since 1985 – reported a 20.2% investment return for year ended June 2014 across all asset classes, putting an extra $4 billion into university coffers. Its private equity portfolio meanwhile has earned 15.4% annually over the last ten years, outperforming the Cambridge Associates PE composite benchmark by 1.7% per year.
Seems this kind of outrage might become something of a hobby for Gladwell who stirred up another storm in a teacup in June after hedge fund billionaire John Paulson donated $400 million to Harvard. You never know, if Gladwell runs up 10,000 hours railing against “hedge funds” he might just become an expert at it.
Photo: Pop!Tech