The so-called “endowment model” of investing – often called the “Yale Model” because it was pioneered by David Swensen at Yale – remains the most prominent institutional investment approach out there. That approach may still be working for Yale (although some would disagree), but in the aggregate it is not.

Data from 831 U.S. college and university endowments and affiliated foundations, representing over $400 billion in endowment assets, shows that the average return for U.S. college endowments was minus-0.3 percent in the 12 months ended in June 2012 (the most recent period for which data is available).   Longer-term returns are not a lot better.  College and university endowments returned an average of only 1.1 percent annually over the past five fiscal years and 6.2 percent over the past decade, net of fees. There is no way to sugarcoat those numbers.  They aren’t very good.  Moreover, Swensen himself concedes that the “average…