Yale Invests in Crypto Fund That Raised $400 Million

Yale University, the Ivy League school that has invested in everything from Puerto Rican bonds to timber in New Hampshire, is getting into the market for cryptocurrencies.

The second-largest endowment in higher education is among investors that helped a new fund focused on digital assets raise $400 million, according to a person with knowledge of the matter, who asked not to be identified because the information is private. The fund, called Paradigm, was recently started by Coinbase Inc. co-founder Fred Ehrsam, former Sequoia Capital partner Matt Huang, and Charles Noyes, an ex-employee of crypto fund Pantera Capital.

Yale, whose nearly $30 billion endowment is headed by David Swensen, is among the few large institutions to invest in the cryptocurrency market, which has tumbled this year after a stunning rally in 2017. The size of its investment in the Paradigm fund couldn’t be ascertained, and the New Haven, Connecticut-based school, didn’t immediately respond to a message seeking comment.

While a wave of institutional capital could reverse the crypto slump, new entrants are being deterred by market manipulation and a lack of regulation. Ninety-six percent of endowments and foundations responding to a survey by consulting firm NEPC in February said they don’t invest in digital currencies.
Investment Model

Swensen’s endorsement of crypto assets is significant because he’s considered a pioneer in institutional investing, having managed one of the most-watched and best-performing college endowments for three decades. Many other endowments have sought to replicate his investment model, which favors a longer time horizon and committing capital to more illiquid assets, including private equity.

U.S. college endowments hold about $550 billion in assets, and Yale has the second largest in higher education, behind Harvard. Under Swensen’s leadership, Yale has returned 11.8 percent on average for the past 20 years.

Almost 60 percent of Yale’s assets in fiscal 2019 are targeted for alternative investments including venture capital, hedge funds and leveraged buyouts, according to the school.
Early Stage

Paradigm, which counts venture-capital firm Sequoia Capital as an investor, plans to invest in early-stage projects focused on cryptocurrencies, new blockchains and exchanges, Noyes told Bloomberg News in June. The firm declined to comment for this story.

In addition to investing directly in digital coins, a number of crypto funds also invest in other funds and buy stakes in blockchain companies.

Yale is a longtime investor in Andreessen Horowitz, which recently launched a $300 million crypto fund. Yale also has invested in this fund, CNBC earlier reported, citing unidentified sources.