As one of the Ivy League schools, Dartmouth College has a world-renowned investment office that manages the school’s multi-billion dollar endowment. The investment office adopts the innovative Yale Model created by legendary investor David Swensen and has achieved superior long-term returns. In this article, we will take a deep dive into Dartmouth’s investment office and explore its investment philosophy, asset allocation, performance, and impact.
Dartmouth follows Yale Model with alternative assets focused strategy
Dartmouth’s investment office manages over $6 billion in endowment assets. It follows the Yale Model pioneered by David Swensen which utilizes heavy allocation to alternative investments like private equity, venture capital, real assets, and hedge funds. Under Swensen’s 23-year leadership at Yale, its endowment had an annualized return of 13.8%. Dartmouth adopted this approach in 2004. Currently, it invests about 70% of its assets in alternatives which comprise private equity, real estate, natural resources, and hedge funds. The allocation provides higher returns and diversification.
Prudent diversification and risk management contribute to long-term outperformance
While adopting the Yale model, Dartmouth customizes it based on its own needs. The investment office prudently diversifies across various asset classes to manage risks. Within each asset class, it further diversifies into different strategies, sectors, geographies, and vintage years. These result in a balanced portfolio resilient to market turbulence. The office also employs derivatives and short positions when suitable to hedge risks. Through astute asset allocation and risk management, Dartmouth’s endowment has achieved an annualized return of 10% over the past decade, outperforming market indexes and peers.
Impact investing initiatives align with school’s mission and values
In recent years, Dartmouth has increased focus on sustainable and impact investing. It established a sustainable endowment coalition to align investment decisions with school’s values and mission. Dartmouth became a signatory to the UN Principles for Responsible Investment. It has over $600 million dedicated to impact investments targeting issues like renewable energy, healthcare, education, and community development. The investment office also actively engages with external managers regarding ESG factors. Pursuing financial returns alongside social impact exemplifies Dartmouth’s ethos of educating responsible leaders.
Investment office fuels Dartmouth’s academic excellence with steady payouts
A key objective of Dartmouth’s investment office is providing stable funding for the school’s academic operations. It maintains a spending rate around 5% of the endowment’s market value. This prudent rate ensures endowment sustains through market cycles while providing reliable payouts. In fiscal year 2021, $287 million was distributed, meeting approximately half of Dartmouth’s operating budget. By delivering robust long-term returns, the investment office enables the school to offer excellent education and research programs across different disciplines.
With a seasoned investment team, customized Yale Model strategy, and focus on ESG principles, Dartmouth’s elite investment office will continue generating superior performance to propel the school’s academic and social impact missions.