Recently it has been reported that a number of distinguished universities in the USA have allocated portions of their endowments to cryptocurrency funds. Harvard University, Stanford University, Massachusetts Institute of Technology (MIT), Dartmouth College and University of North Carolina have all invested undisclosed amounts in the crypto space. These educational institutions are among the highest ranking in the world and they command huge endowments, with Harvard at around $39.2bn, Yale with a reported $29.4bn and Dartmouth at about $5.5bn. University endowments are generally used to pay salaries, and sponsor research, and investments of these funds were typically only made in stable assets.
David Swensen, Yale’s Chief Investment Officer, has successfully managed Yale’s endowment fund for three decades. His closely-watched, revolutionary investment model, which generally features a longer-term horizon and more illiquid assets, has drawn record high returns. It has been reported that 60% of Yale’s assets in the fiscal year 2019 have been set aside for alternative investments such as hedge funds, VC and leveraged buyouts.
Reports have surfaced that Swensen has made an allocation toward Paradigm - a cryptocurrency and blockchain fund that raised $400mn. Paradigm was started by Coinbase Inc. co-founder Fred Ehrsam, former Sequoia Capital partner Matt Huang and Charles Noyes, an ex-employee of Pantera Capital. Yale has also invested in a16z - Andreessen Horowitz’s $300mn USD crypto fund. On the heels of Yale’s investment in the crypto space, other reputed universities have quickly followed suit. Cryptocurrencies are considered to be a volatile asset class among traditionally risk-averse endowment fund managers, so this move by prestigious academic institutions to enter the sector provides an endorsement of the digital asset class. Warren Buffett famously sentenced cryptocurrency to doom, terming bitcoin ‘rat poison’. David Swensen, Yale’s ‘in-house Warren Buffet’, clearly disagrees. Evidently, one man’s rat poison is another’s gold.
Jon Victor, Yale alumni, and The Information’s crypto journalist commented on this emerging trend.
“A move by endowments into funds that will directly bet on cryptocurrencies signals a major shift in investor sentiment toward the asset class, in the same way, that institutions over the past decade became more willing to invest in private tech companies. Backing from such closely watched institutions could help validate cryptocurrencies, which are still considered too risky by many institutional investors.”
With academic institutions backing cryptocurrencies, major international universities have now introduced crypto-based coursework to their curriculum by offering blockchain courses and more. Cambridge University has conducted in-depth research in the crypto field and Bitcoin is even accepted as payment for tuition at the University of Lucerne.
Hedge funds & VCs are constantly looking for new investment vehicles that will speed up their gains and sensing the wealth of opportunity in this sector, have begun entering the crypto space at a record pace. This is an indication that the emerging asset class is steadily gaining the acceptance of institutional investors. Their vote of confidence may be what the crypto space needs after a tumultuous past year where the overall marketcap prices surged to over USD 700 Billion $20,000 at the end of the year and then corrected due to regulatory uncertainty and a lack of new buyers. The interest of this influential investor category and the introduction of regulatory platform Bakkt could possibly lead to a bull run in the market.