Yale chooses Matthew Mendelsohn ’07 to lead its investment office

Dan Renzetti / Yale News

After international research, Matthew Mendelsohn ’07 will succeed David Swensen Ph.D ’80 as Director of Investments and will manage the second largest university endowment in the country.

Mendelsohn joined the Bureau of Investments in 2007 as one of Swensen’s protégés. He recently oversaw Yale’s venture capital investments, which account for more than a quarter of the endowment.

The university began the search for Swensen’s successor in May, when the pioneering investor died after a nine-year battle with cancer. A seven-member search committee conducted an international search before finally deciding on an internal candidate. Mendelsohn will assume leadership of the Yale endowment on September 1.

“With Matt, it comes down to a rare combination of qualities: extremely high talent, superb work ethic, impeccable ethics, extensive experience in the Yale investment office, a natural ability to lead and strong personal connections. with Yale going back to its undergraduate days, ”wrote college president Peter Salovey in an email to The News.

Under Mendelsohn’s leadership, Yale’s venture capital portfolio has generated an average annual return of 21.6% over the past decade, well above the S&P 500 and relevant private equity benchmarks. He has also helped manage Yale’s domestic and foreign stocks, absolute return and natural resource asset classes, Salovey wrote in an email to the Yale community. Under Swensen, Mendelsohn worked with Yale’s external managers. He also co-taught an endowments management course at Yale’s School of Management from 2013 to 2018.

As head of the endowment fund, Mendelsohn will need to respond to calls for more ethical investments and greater diversity within the endowment management industry. In October 2020, Swensen wrote a letter demanding that managers hire more diverse employees and saying Yale would do the same. In April, the University unveiled new standards for divestment from fossil fuel companies. Mendelsohn affirmed his commitment to the principles put forward by Swensen, stating that the office “needs[s] do better ourselves ”and seek diversity among its investment partners. The best ideas emerge from a “diversity of opinions, perspectives and lived experiences,” he told The News.

“While we evolve to face new challenges, the future will undoubtedly rhyme with the past as we build on a solid foundation,” Mendelsohn wrote in a statement. “Going forward, we will build on the office’s long-standing allegiance to ethical investment practices and develop a diverse team of internal and external investment managers as we seek to continue the legacy of successful investments. by Yale. “

Swensen came to Yale in 1985, when the university had a billion dollar endowment. Over the following decades, he diversified the portfolio – encompassing venture capital and private equity – and raised the endowment to its most recent reported value: $ 31.2 billion in June 2020. Mendelsohn a told The News that the main lesson he would take from Swensen’s tutelage is that investing “is about people” – that aligning with strong partners and treating them with respect will produce good results.

“Matt has the qualities you would expect from a person supervised by David Swensen,” wrote Benjamin Polak, professor of economics and chairman of the research committee, in an email to News. “It starts with integrity and a dedication to Yale’s mission. Like David, Matt is analytically rigorous and disciplined. Like David, Matt approaches every investment opportunity from the basics and is a great judge of character. Like David, Matt has a clear moral compass. Like David, Matt is a team builder and mentor, investor and leader.

After Swensen’s death in May, the University appointed a committee to search for his successor. Alex Banker GRD ’80, Director of YIO, served as Interim Investment Director for the duration of the research.

Along with Polak, five current and former members of the Yale Corporation investment committee, which oversees endowment, and a professor from SOM made up the other members of the research committee. The committee worked in conjunction with David Barrett Partners, an executive search firm.

Salovey gave the committee the option to present a list of candidates or make a clear recommendation, he said in a June interview with The News. The committee ultimately chose to recommend Mendelsohn as its only candidate, Salovey said. The Yale Corporation then voted to endorse Mendelsohn for the role.

Swensen had met Mendelsohn at a Berkeley Fellows event, when the latter was a senior at Yale College, and hired him after graduation. Before Swensen’s death, the famous investor shared his views on industry investors and members of his own team with Yale’s investment committee, Salovey explained. Mendelsohn was one of the few internal candidates Swensen identified as a potential successor, The Wall Street Journal reported.

But Salovey said Swensen’s comments did not include a concrete list of potential successors. Swensen shared people he admired, but never “pointed to someone” and suggested them, Salovey said. Swensen also shared his disease progression with the investment committee, and how to sort out in an emergency medical situation.

Charles Skorina, who runs an investment manager recruiting firm, said Mendelsohn is an “obvious choice”.

“It screams at you,” Skorina told The News. “He’s the right age, he’s working in the right field – private equity and venture capital, these are top fields – he has a lot of time. He is very appreciated… So the culture, the institutional memory, the tradition, the diplomas, the experience, the age, everything is fine.

Charley Ellis ’59, former chairman of the investment committee and close friend of Swensen, explained that venture capital requires “disciplined thinking” and that Swensen would not have given someone the responsibility for capital investments. risk unless he was “really good at the kind of disciplined thinking that was the focus of Yale’s investment program.

Mendelsohn’s next challenge is to determine how long the “Yale model” for investing will remain the best, Skorina said, adding that venture capital and private equity investments will continue to generate better returns over the long term. term than those of public procurement. But investors need a system to decide which managers to invest with and they need access to the best managers; it’s unclear exactly how Yale will fare without Swensen, Skorina added.

But investors are typically required to hold their money in venture capital or private equity for five to ten years, Skorina said. The makeup of Yale’s endowment is therefore unlikely to change drastically in the coming years, even under new leadership, he added.

Both Salovey and Ellis explained that Swensen was driven on the one hand by managing risk, and on the other hand by realizing returns, meaning he was willing to decrease returns slightly to achieve greater security for investments, Salovey explained. Ellis compared risk management to someone competing in the Indianapolis 500.

“Finishing first is the second most important,” said Ellis. “The finish is more important. Anytime you find yourself in a difficult, complicated, fast-paced, and particularly dangerous place, risk management really matters.

Like Swensen, Mendelsohn hails from the Midwest.