Yale’s Influential Endowment Manager Invests in Cryptocurrencies

David Swensen, chief investment officer (CIO) of Yale University’s $29.4 billion endowment fund, has wet his foot in the digital currency space after investing in two cryptocurrency-focused venture funds.

Swensen’s team invested an undisclosed amount in Andreessen Horowitz’s $300-million cryptocurrency fund and Paradigm, a blockchain venture fund established by Fred Ehrsam, Coinbase co-founder, and Matt Huang, a former partner at Sequoia Capital.

Swensen took over the university’s endowment fund in 1985, when it managed only just over $1 billion but now has grown almost 30 times more under his watch.

Sources close to the matter told CNBC about the developments but declined to be named because of the confidentiality of the matter. At the time of writing, there is no official word from the Yale Investment Office, Andreessen Horowitz, or Paradigm.

The latest move is a welcome development in the crypto sector, which is having a troubled year partly because of regulatory uncertainty and correction after what could have potentially been an unsustainable rally. Last year, Bitcoin’s price surged by around 1,300 percent after it began the year at just over $1,000 and reached nearly $20,000 before the end of the year.

However, the correction in the market has not deterred top institutional investors from entering the market as several governments from the world are showing some signs of embracing the market and relaxing the stringent regulation.

Cryptocurrency investment Funds

According to research data from Autonomous Next, cryptocurrency-focused funds have grown from 23 in 2016 to 223 in 227 and to 389 as of Sept. 1.

Speaking to CNBC some time ago, Chris Dixon, the showrunner of Andreessen Horowitz’s cryptocurrency fund, said that the firm is committed to long-term investment, irrespective of market conditions. The firm will invest in both coins in early-stage developments and well-established networks such as Bitcoin and hold them for as long as a decade.

Andreessen Horowitz started its crypto journey in 2013 when it invested in Coinbase. Co-founder and Chief Executive of Coinbase Brian Armstrong is optimistic about the market because he believes that cryptocurrencies will be used by more than a billion people (12.9 percent of the global population) in five years to come.

Paradigm is a relatively new firm that will invest in crypto firms and exchanges in their early-stage development.

In the past, venture investors have been cautious about investing in digital currencies because of the industry’s volatility.

Bill Barhydt, chief executive of Abra cryptocurrency exchange, said:

“People are excited about it but afraid of being the first or having to explain themselves. That’s the fear vs. greed of institutional investing. There’s a herd mentality there as much as there is in retail investing.”

Swensen Is Yale’s “‘In-House Warren Buffett”

Swensen’s success has earned him the nickname “Yale’s in-house Warren Buffett.” But given his take on cryptocurrencies, the real Warren Buffett won’t be impressed at all.

Buffett, also known as the “Wizard of Omaha,” does not believe in cryptocurrencies and made it even clearer in May at the sidelines of the annual Berkshire Hathaway shareholder meeting in Nebraska when he referred to Bitcoin as “rat poison squared.”

Swensen manages a large endowment fund only second to Harvard’s $39.2-billion endowment fund. Swensen’s fund posted 11.8-percent returns over the past two decades. The university announced on Oct. 1 that it gained 12.3 percent between June 2017 and July 2018.

Swensen’s impressive track record will likely cause a ripple effect and influence other endowment funds to follow suit, pushing further the adoption of cryptocurrencies by mainstream institutional investors.




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