Elite universities sell private equity stakes amid market scrutiny

⁣‍ ​ ​ Updated ‍June 15,2025
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Harvard,Yale,and other top‌ universities are selling off portions of their private equity holdings, joining a growing trend as institutions⁣ seek greater liquidity and flexibility in the face of economic uncertainty. These sales, often at a discount, come as private equity ⁤funds take longer to deliver ‍returns.

While the motivations behind these moves are complex, some industry observers suggest ‌they highlight concerns about the true performance of ⁣ private equity investments.‍ The secondary market​ for‌ these stakes is currently booming.

Nir Kaissar, founder⁢ of Unison Advisors, wrote that these sales will provide more openness ​into the frequently enough-opaque world of private assets.

University endowments have historically been ideal investors in option ⁢assets,‍ thanks to⁣ their long-term investment ​horizons. However, the valuations of private assets, unlike publicly traded stocks,⁣ are often based on subjective assumptions, according to Tim McGlinn, an investment veteran and former adjunct finance professor at Seton Hall.

“There’s‍ nothing intrinsically wrong with that,”‍ McGlinn said, but problems arise when investors‍ believe these valuations reflect actual market prices.

Jason Reed, a ​finance professor at the University‍ of Notre Dame, said that private equity firms ultimately ​rely on exiting investments to generate ‍returns, creating a link between public and private asset performance.

Harvard and Yale’s moves

Bill ⁣Ackman, a Harvard alumnus and billionaire hedge fund ⁤owner, ‌ claimed that​ Harvard’s $53 billion endowment, heavily allocated⁣ to⁣ private equity, is overvalued. the Harvard Management Company declined to comment on the sale of roughly $1 billion of its private equity stakes.

yale is⁢ reportedly negotiating the sale of nearly ‍$3 billion in private‌ equity holdings at a discount of less⁢ than 10%,​ according to a ⁣spokesperson ‍for the Yale Investments Office. The university, a pioneer in alternative asset‍ investing, maintains that private equity ​ remains a core element of its investment strategy.

McGlinn characterized‌ Yale’s deal⁤ as difficult to assess, noting the varying nature of⁢ funds ​and positions involved. “Yale being Yale, you can assume they’re getting the best ⁤price they can,” mcglinn said.

The⁤ buyer’s viewpoint

According to Jeffries,investors in private equity funds​ sold their stakes at an average ⁤discount​ of 11% compared to their net asset⁤ value (NAV). Despite potentially lower valuations due to elevated borrowing costs,​ the ⁢secondary market is thriving, with sales increasing considerably last year.

McGlinn suggests that‌ buyers might potentially be willing to overpay‍ due to a ⁢practice he calls “NAV squeezing,”⁣ where they mark up acquired investments​ to the old net ‍asset value, resulting in ‍considerable one-day gains. The Wall Street Journal reported on ​this phenomenon last year.

Jeffrey ⁤Hooke,​ a finance⁢ lecturer at⁤ Johns Hopkins Carey Business School, finds the practice questionable, even if ⁤permissible under GAAP accounting standards.‍ He likens it to a “full wash⁤ and rinse cycle.”

Ultimately,universities may still profit from these sales,even at a discount,potentially exceeding their initial capital commitments.

What’s next

The ⁣trend ​of universities rebalancing their portfolios is expected to continue, with close ⁣attention paid to the performance ​of both public and private markets.The long-term implications of NAV squeezing and its impact on reported returns will⁣ likely face increased scrutiny.