Yale University starts betting on crypto with Andreessen Horowitz, Paradigm

World-renowned Ivy League University, Yale, is getting into the crypto game, starting with a bet on funds run by Paradigm and Andreessen Horowitz.

CNBC and Bloomberg, citing anonymous sources, are both reporting that Yale University’s chief investment officer, David F. Swensen, has put money into funds dedicated to cryptocurrencies.

One of them, apparently, is venture capital giant Andreessen Horowitz’s $300m crypto fund – which closed for entries in June 2018 after placing investments in blockchain-powered cloud computing project DFinity, among others. The second fund picked by Swensen’s team is Paradigm, which was founded by Coinbase’s co-creator Fred Ehrsam and ex-Sequoia Capital partner Matt Huang. 

The news should give markets a much needed boost, after recent reports criticising the lack of institutional money in crypto investments. Swensen is widely regarded as one of the world top money managers, overseeing Yale’s endowment portfolio since 1985. The fund has grown from $1bn three decades ago to $29.7bn this year. 

Endowments are funds that tend to be administered by colleges, universities, other educational facilities or charities as a way of pooling large donations to earn extra income. Thus, the size of a university’s endowment is a fairly reliable measure of its financial health. Most start with donations of money or property to an institution, with the aim being to keep an investor’s principal amount intact – as happens with a bond for corporations or governments, while reaping the rewards of investment income over time.

The university has reportedly targeted 60% of its funds towards ‘alternative’ investments as concerns grow over rising interest rates putting a halt to bullish and overinflated stock markets.

Its endowment is now the largest source of revenue for the university, having reported a 12.3% investment return this year. The institution is expecting to spend $1.4bn in 2019 and it says funds moved from endowment investment gains to the school have increased at a rate of 8.7% over the past 20 years.

Up until now, the world’s best investors have taken a very cautious line on cryptocurrencies – even the bundled funds started by big venture capital firms. In March, Warren Buffet slammed Bitcoin in an interview with CNBC as “an asset that creates nothing” and one which relies on finding “a greater fool” to buy at a higher price than original investors paid.