耶鲁捐赠基金2007年（耶鲁投资办公室年度报告）

The Yale Endowment Endowment Highlights Fiscal Year 2007 2006 2005 2004 2003 Market Value (in millions) $22,530.2 $18,030.6 $15,224.9 $12,747.2 $11,034.6 Return 28.0% 22.9% 22.3% 19.4% 8.8% Spending (in millions) $ 684.0 $ 616.0 $ 567.0 $ 502.0 $ 470.1 Operating Budget Revenues 2,075.0 1,932.0 1,768.0 1,630.8 1,553.7 (in millions) Endowment Percentage 33.0% 31.9% 32.2% 30.8% 30.3% Asset Allocation (as of June 30) Absolute Return 23.3% 23.3% 25.7% 26.1% 25.1% Domestic Equity 11.0 11.6 14.1 14.8 14.9 Fixed Income 4.0 3.8 4.9 7.4 7.4 Foreign Equity 14.1 14.6 13.7 14.8 14.6 Private Equity 18.7 16.4 14.8 14.5 14.9 Real Assets 27.1 27.8 25.0 18.8 20.9 Cash 1.9 2.5 1.9 3.5 2.1 Endowment Market Value 1950–2007 $25 $20 $15 Billions $10 $5 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 Contents 1. Introduction 2 2. The Yale Endowment 3 3. Investment Policy 4 4. Spending Policy 15 5. Investment Performance 20 6. Management and Oversight 23 Front cover: Wall carving from west façade, Sterling Memorial Library.

Right: A window in Sterling Memorial Library.

Introduction Yale’s Endowment generated extraordinarily strong results in fiscal year 2007, as investment returns of 28.0 percent produced record-setting investment gains of $5.0 billion. For the third straight year, Yale enjoyed returns well in excess of 20 percent.

Over the past ten years, the Endowment grew from $5.8 billion to $22.5 billion. With annual net investment returns of 17.8 percent, the Endowment’s performance exceeded its benchmark and outpaced institutional fund indices. The Yale Endowment’s twenty-year record of 15.6 percent per annum produced a 2007 Endowment value of more than ten times that of 1987. Yale’s superb long-term record resulted from disciplined and diversified asset allocation policies, superior active manage-ment results, and strong capital market returns. Spending from Endowment grew during the last decade from $191 million to $684 million, an annual growth rate of approximately 14 percent. On a relative basis, Endowment contributions expanded from 18 percent of total revenues in fiscal 1997 to 33 percent in fiscal 2007. Next year, spending will amount to $843 million, or 37 percent of projected revenues. Yale’s spending and investment policies have provided hand-some levels of cash flow to the operating budget for current scholars while preserving Endowment purchasing power for future generations.

Endowment Growth Outpaces Inflation 1950–2007 $24 $22 $20 $18 $16 $14 $12 Billions $10 $8 $6 $4 $2 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 1950 Endowment Inflated Post-1950 Endowment Gifts Inflated Endowment Market Value The Yale Endowment Totaling $22.5 billion on June 30, 2007, the Yale Endowment contains thousands of funds with a variety of designated purposes and restrictions.

Approximately four-fifths of funds constitute true endowment, gifts restricted by donors to provide long-term funding for designated pur-poses. The remaining one-fifth represent quasi-endowment, monies that the Yale Corporation chooses to invest and treat as endowment. Donors frequently specify a particular purpose for gifts, creating endowments to fund professorships, teaching, and lectureships (23 per-cent), scholarships, fellowships, and prizes (18 percent), maintenance (4 percent), books (3 percent), and miscellaneous specific purposes (26 percent). Twenty-six percent of funds are unrestricted. Thirty-four percent of the Endowment benefits the overall University, with remaining funds focused on specific units, including the Faculty of Arts and Sciences (30 percent), the professional schools (23 percent), the library (7 per-cent), and other entities (6 percent). Although distinct in purpose or restriction, Endowment funds are commingled in an investment pool and tracked with unit accounting much like a large mutual fund. Endowment gifts of cash, securities, or property are valued and exchanged for units that represent a claim on a portion of the whole investment portfolio.

In fiscal 2007, the Endowment provided $684 million, or 33 per-cent, of the University’s $2,075 million operating income. Other major sources of revenues were grants and contracts of $526 million (25 per-cent), medical services of $344 million (17 percent), net tuition, room, and board of $237 million (11 percent), gifts of $98 million (5 percent), other investment income of $94 million (5 percent), and other income and transfers of $92 million (4 percent).

Endowment Fund Allocation Operating Budget Revenue Fiscal Year 2007 Fiscal Year 2007 Grants & Contracts Miscellaneous Professorships Specific Purposes Tuition, Room, Board Medical Services Scholarships Endowment Unrestricted Gifts Maintenance Other Investment Income Books Other Income Investment Policy Yale’s portfolio is structured using a combination of academic theory and informed market judgment. The theoretical framework relies on mean- variance analysis, an approach developed by Nobel laureates James Tobin and Harry Markowitz, both of whom conducted work on this important portfolio management tool at Yale’s Cowles Foundation. Using statistical techniques to combine expected returns, variances, and covariances of investment assets, Yale employs mean-variance analysis to estimate expected risk and return profiles of various asset allocation alternatives and to test sensitivity of results to changes in input assumptions. Because investment management involves as much art as science, qualitative considerations play an extremely important role in portfolio decisions. The definition of an asset class is quite subjective, requiring precise distinctions where none exist. Returns and correlations are di∞-cult to forecast. Historical data provide a guide, but must be modified to recognize structural changes and compensate for anomalous periods. Quantitative measures have di∞culty incorporating factors such as mar-ket liquidity or the influence of significant, low-probability events. In spite of the operational challenges, the rigor required in conducting mean-variance analysis brings an important perspective to the asset allo-cation process. The combination of quantitative analysis and market judgment employed by Yale produces the following portfolio: June Current Asset Class 2007 Target Absolute Return 23.3% 23.0% Domestic Equity 11.0 11.0 Fixed Income 4.0 4.0 Foreign Equity 14.1 15.0 Private Equity 18.7 19.0 Real Assets 27.1 28.0 Cash 1.9 0.0 The target mix of assets produces an expected real (after inflation) long-term growth rate of 6.3 percent with a risk (standard deviation of returns) of 12.4 percent. Because of deviations in actual holdings from target levels, the actual allocation produces a portfolio expected to grow at 6.2 percent with a risk of 12.2 percent. The University’s measure of inflation is based on a basket of goods and services specific to higher education that tends to exceed the Consumer Price Index by approximately one percentage point.

At its June 2007 meeting, Yale’s Investment Committee adopted a number of changes in the University’s policy portfolio allocations. Despite massive capital inflows to the alternatives arena, Yale’s disciplined man-agers continue to find compelling opportunities. The Committee approved an increase in the private equity target from 17 percent to 19 percent due to the persistence of attractive bottom-up opportunities, even in this heated market. The University increased the real assets allocation from 27 percent to 28 percent, as Yale’s managers demonstrate the ability to source o≠-market acquisitions at below-market prices. The increases in the illiquid asset classes were funded by a 2 percentage point decrease in the absolute return target allocation to 23 percent, and a 1 percentage point decrease in the domestic equity target allocation to 11 percent. The need to provide resources for current operations as well as preserve purchasing power of assets dictates investing for high returns, causing the Endowment to be biased toward equity. In addition, the University’s vulnerability to inflation further directs the Endowment away from fixed income and toward equity instruments. Hence, 96 percent of the Endowment is targeted for investment in assets expected to produce equity-like returns, through holdings of domestic and international securities, real assets, and private equity. Over the past two decades, Yale reduced dramatically the Endowment’s dependence on domestic marketable securities by reallocat-ing assets to nontraditional asset classes. In 1987, nearly 80 percent of the Endowment was committed to U.S. stocks, bonds, and cash. Today, tar-get allocations call for 15 percent in domestic marketable securities, while the diversifying assets of foreign equity, private equity, absolute return strategies, and real assets dominate the Endowment, representing 85 per-cent of the target portfolio. The heavy allocation to nontraditional asset classes stems from their return potential and diversifying power. Today’s actual and target portfolios have significantly higher expected returns and lower volatility than the 1987 portfolio. Alternative assets, by their very nature, tend to be less e∞ciently priced than traditional marketable securities, providing an opportunity to exploit market ine∞ciencies through active management. The Endowment’s long time horizon is well suited to exploiting illiquid, less e∞cient markets such as venture capital, leveraged buyouts, oil and gas, timber, and real estate.

Asset Class Yale’s six asset classes are defined by di≠erences in their expected response Characteristics to economic conditions, such as price inflation or changes in interest rates, and are weighted in the Endowment portfolio by considering risk-adjusted returns and correlations. The University combines these assets in such a way as to provide the highest expected return for a given level of risk.

Absolute Return In July 1990, Yale became the first institutional investor to pursue absolute return strategies as a distinct asset class, beginning with a target allocation of 15 percent. Designed to provide significant diversification to the Endowment, absolute return investments seek to generate high long-term real returns by exploiting market ine∞ciencies. Approximately half of the portfolio is dedicated to event-driven strategies, which rely on a very specific corporate event, such as a merger, spin-o≠, or bankruptcy restructuring to achieve a target price. The other half of the portfolio con-tains value-driven strategies, which involve hedged positions in assets or securities that diverge from underlying economic value. Today, the absolute return portfolio is targeted to be 23.0 percent of the Endowment, above the average educational institution’s allocation of 19.5 percent to such strategies. Absolute return strategies are expected to generate real returns of 6.0 percent with risk levels of 10.0 percent for event-driven strategies and 15.0 percent for value-driven strategies.

Unlike traditional marketable securities, absolute return invest-ments provide returns largely independent of overall market moves. Over the past ten years, the portfolio exceeded expectations, returning 13.1 per-cent per year with essentially no correlation to domestic stock and bond markets.

An important attribute of Yale’s investment strategy concerns the alignment of interests between investors and investment managers. To that end, absolute return accounts are structured with performance-related incentive fees, hurdle rates, and clawback provisions. In addition, managers invest a significant portion of their net worth alongside Yale, enabling the University to avoid many of the pitfalls of the principal-agent relationship.

Domestic Equity Finance theory predicts that equity holdings will generate returns superior to those of less risky assets such as bonds and cash. The predominant asset class in most U.S. institutional portfolios, domestic equity repre-sents a large, liquid, and heavily researched market. While the average educational institution invests 26.3 percent of assets in domestic equities, Yale’s target allocation to this asset class is only 11.0 percent. The domes-tic equity portfolio has an expected real return of 6.0 percent with a stan-dard deviation of 20.0 percent. The Wilshire 5000 Index serves as the portfolio benchmark.

Despite recognizing that the U.S. equity market is highly e∞cient, Yale elects to pursue active management strategies, aspiring to outper-form the market index by a few percentage points annually. Because superior stock selection provides the most consistent and reliable opportunity for generating excess returns, the University favors managers with exceptional bottom-up fundamental research capabilities. Managers searching for out-of-favor securities often find stocks that are cheap in relation to current fundamental measures such as book value, earnings, or cash flow. Recognizing the di∞culty of outperforming the market on a consistent basis, Yale searches for managers with high integrity, sound investment philosophies, strong track records, superior organizations, and sustainable competitive advantages.

Fixed Income Fixed income assets generate stable flows of income, providing greater certainty of nominal cash flow than any other Endowment asset class. The bond portfolio exhibits a low covariance with other asset classes and serves as a hedge against financial accidents or periods of unanticipated deflation. While educational institutions maintain a substantial allocation to fixed income instruments and cash, averaging 12.7 percent, Yale’s target allocation to fixed income constitutes only 4.0 percent of the Endowment. Bonds have an expected real return of 2.0 percent with risk of 10.0 per-cent. The Lehman Brothers U.S. Treasury Index serves as the portfolio benchmark.

Yale is not particularly attracted to fixed income assets, as they have the lowest historical and expected returns of the six asset classes that make up the Endowment. In addition, the government bond market is arguably the most e∞ciently priced asset class, o≠ering few opportunities to add significant value through active management. Based on skepticism of active fixed income strategies and belief in the e∞cacy of a highly structured approach to bond portfolio management, the Investments O∞ce chooses to manage Endowment bonds internally. In spite of an aversion to market timing strategies, credit risk, and call options, Yale manages to add value consistently in its management of the bond portfolio. Willingness to accept illiquidity leads to superior investment results without impairing the portfolio protection characteristics of high-quality fixed income.

Yung Wing and the Chinese Educational Mission Samuel Wells Williams (later a Yale Wenyao), Yale’s first Chinese coxswain, College faculty member): “Old Yale is sur- made such a deep impression on the com-rounded with an atmosphere of ambition... munity that nearly thirty years after his I never was subject to such excitement. I departure from the University, the Hartford enjoy its influence very much.” In spite of Courant recounted the following story: his troubles with calculus, Yung Wing “Famous in Yale annals as the coxswain of gained the admiration of his peers by win- the Yale shell which distanced Harvard in the ning two first prizes in English composi- race of 1880, Chung was a favorite among his tion. During his junior and senior years, he classmates. He was a bright student who never worked as a librarian for the Brothers in lost his temper and who was never known to Unity debating society, allowing him to swear, except on one occasion. That was during develop relationships with “members of the race with Harvard in 1880. Toward the the three classes above, and members of finish, the little coxswain broke out with the three classes below” and thrusting ‘Damn it boys, pull!’: The boys did and Yale Yung Wing into “the college world at won the race.” large.” Chung went on to join China’s diplo-During his time in New Haven, Yung matic service. Chung and fellow CEM stu-Wing’s mind never veered far from the dents provided China with a generation of needs of his homeland. While on long professional engineers, diplomats, and uni-A portrait of Yung Wing (Rong Hong), 1828-1912, walks, he and classmate Carrol Cutler (the versity presidents. Two Yale alumni went B.A. 1854, the first Chinese student to graduate future president of Case Western Reserve on to lead particularly illustrious careers: from a North American university. The painting, by University) discussed the idea of an “edu- Jeme Tien Yau and Tong Koh-On. Jeme Judith Reeve, is based on a lithograph of Yung in his Yale class book. Commissioned by the Yalecational mission,” whereby Chinese stu- Tien Yau, ph.b. 1881 (Zhan Tianyou), was China Association in 2000, the painting hangs in dents would be sent to the United States admitted to Yale’s civil engineering pro-the Yale College Dean’s O∞ce. for the best liberal arts education this coun- gram in 1878. Jeme is the celebrated engi-try o≠ered. “I was determined that the ris- neer of the Beijing-Zhangjiakou railroad A graduate of the Yale College class of 1854, ing generation of China should enjoy the line, the first in China to be built without Yung Wing (Rong Hong) was the first same educational advantages that I had direct foreign assistance. Although many Chinese student to obtain a diploma from a enjoyed,” Yung Wing later wrote in his were skeptical that Jeme could successfully North American university. Born in 1828 to autobiography. “Towards such a goal, I navigate the mountainous northern terrain a peasant family near Nanping, Guang- directed all of my mental resources and that separated Beijing from Zhangjiakou, dong Province, Yung Wing left home at the energy.” he delivered the project under budget and age of seven to attend missionary school. two years ahead of schedule. Fondly At age thirteen he entered the Morrison The Chinese Educational Mission remembered as the “father of the Chinese Education Society School, where he distin- railroads,” Jeme instituted a number of rail-After graduation from Yale, Yung Wing guished himself as an excellent student, road standards that are still in force today. spent ten years in the tea and silks busi-earning the admiration of school principal ness. He returned to a China wracked by Samuel Robbins Brown (b.a. 1832). In violent internal rebellions and increasingly 1847, Brown brought Yung Wing to the aggressive incursions from the West. In United States, where he enrolled in 1863, Yung Wing had the opportunity to Massachusetts’ Monson Academy under present his plan for sending Chinese stu-the direction of Dr. Charles Hammond dents abroad to Zeng Guofan, a liberal-(b.a. 1839). minded Chinese o∞cial who was the driv-When Yung Wing arrived at Yale ing force behind the “self-strengthening” College in the fall of 1850, he was the only movement, a progressive e≠ort to stabilize Chinese student in a class of ninety-eight and modernize an increasingly fractured young men. Yung Wing’s “Bright College China. In March 1872, the Qing govern-Years” were filled with both obstacles and ment approved the Chinese Educational triumphs. During his freshman year, he Mission (CEM), the formalization of the toiled over his studies deep into the night. plan that Yung Wing hatched at Yale nearly He had almost no social life and took little two decades earlier. exercise. Yung Wing was constantly The CEM called for 120 boys ranging plagued by self-doubt regarding his aca-from eleven to fifteen years old to study in demic abilities. He had “an utter aversion the United States, in batches of thirty per to mathematics, especially to di≠erential year, for fifteen years. Yung Wing accom-and integral calculus,” which he “abhorred panied the first batch of boys back to the and detested.”

U.S., setting up headquarters in Hartford. Yung Wing’s listing of the 1,237 volumes of Chinese Despite a rough start, Yung Wing was In all, twenty-one Chinese students texts that he contributed to Yale in 1877, following moved by his experience at Yale. In enrolled at Yale through the CEM. One stu- the University’s agreement to establish a professor-December 1850, he wrote to his mentor ship in Chinese languages and literature. dent, Chung Mun Yew, b.a. 1883 (Zhong Tong Koh-On (Tang Guo’an), the first Contributions to Yale Yale today, over 150 years after his gradua-president of China’s prestigious Tsinghua tion. Two endowed funds, the Yung Wing As he carried out his e≠orts on behalf of University, enrolled at Yale in 1880. During Memorial Scholarship and the Yung Wing China, Yung Wing reflected on ways to Tong’s freshman year, conservatives in the Memorial Fund for International Students, contribute to Yale. In 1877, Yung Wing Qing government called into question the were created in his honor to support inter-o≠ered to bestow a collection of 1,237 vol-usefulness of the CEM. Despite the national students and students of Chinese umes of Chinese texts on Yale if the entreaties of Yung Wing, his personal descent. More students and scholars come Corporation established a professorship in friend Samuel T. Clemens (a.k.a. Mark to Yale from China than from any other Chinese languages and literature. Gently Twain), Yale President Noah Porter, and country, with current totals of over 300 urging the Yale Corporation to adopt his Amherst College President Julius Seelye, Chinese students and more than 330 plan, Yung Wing wrote, “I hope Yale will the Chinese government discontinued the Chinese scholars. Yale students have the not delay this matter long lest Harvard CEM program in 1881 and ordered the boys opportunity to study Chinese language and anticipate us.” Yale agreed, laying the foun-to sail home to China. Tong never obtained Chinese society not only through numer-dation for the University’s East Asian a Yale degree, but his compatriot, coxswain ous course o≠erings in New Haven, but Studies program at a time when few Chung, returned to Yale in 1904 for his also through programs based in China con-American colleges o≠ered such instruction. twentieth reunion, when he was awarded ducted jointly with Chinese universities. Yung Wing’s former mentor, Samuel Wells his Bachelor of Arts in the Class of 1883. Nearly every Yale department supports Williams, became Yale’s first professor of While Yung Wing was in the process of ventures that allow University researchers Chinese language and literature. In one of planning for and implementing the CEM, to work with their colleagues in China. his last acts, Williams left a bequest to Yale he also engaged in a range of other activi- Yale’s e≠orts to cooperate with China mark earmarked to fund the teaching of the ties: he helped establish the China the legacy of a young man who planned Chinese language or “to assist worthy Merchant’s Steamship Company, China’s and dreamed under the elms of Old Brick Chinese students in the College who may first domestically owned joint-stock corpo- Row so long ago. be in need.” The Williams fund, created in ration; he advocated for the rights of 1903, is the University’s earliest China-Chinese laborers in Peru, who were often related endowment. mistreated by their employers; and he Although profoundly disappointed by helped the Qing government purchase mil-the CEM’s termination, Yung Wing continitary equipment to modernize the Chinese ued to promote cross-cultural understand-armed forces. In 1876, in recognition of his ing and to pursue the betterment of China many accomplishments, Yung Wing well into his old age. He grew from a self-received an honorary degree from Yale Law doubting Yale freshman into one of the School. most influential Chinese figures of his time. Yung Wing’s influence is still felt at Chung Mun Yew (Zhong Wenyao), B.A. 1883, Yale’s first Chinese coxswain, was brought to the United States through the Chinese Educational Mission, a program that sponsored Chinese students in this country, founded through the e≠orts of Yung Wing.

Foreign Equity Investments in overseas markets give the Endowment exposure to the global economy, providing substantial diversification along with opportunities to earn above-market returns through active management. Emerging markets, with their rapidly growing economies, are particularly intriguing, causing Yale to target 6.0 percent of its portfolio to such opportunities, equal to the 6.0 percent allocated to foreign developed equities. In June 2007, Yale articulated a target of 3.0 percent of the port-folio to opportunistic foreign positions, with the expectation that hold-ings will be concentrated in emerging markets, particularly China and India. Yale’s foreign equity target allocation of 15.0 percent stands materi-ally below the average endowment’s allocation of 22.1 percent. Expected real returns for emerging equities are 8.0 percent with a risk level of 25.0 percent, while developed equities are expected to return 6.0 percent with risk of 20.0 percent. The portfolio is measured against a composite benchmark of 40 percent developed markets, measured by the Morgan Stanley Capital International (MSCI) Europe, Australasia, and Far East Index, 40 percent emerging markets, measured by the MSCI Emerging Markets Index, and 20 percent opportunistic, measured by the Higher Education Price Index plus 8 percent.

Yale’s investment approach to foreign equities emphasizes active management designed to uncover attractive opportunities and exploit market ine∞ciencies. As in the domestic equity portfolio, Yale favors managers with strong bottom-up fundamental research capabilities. Capital allocation to individual managers takes into consideration the country allocation of the foreign equity portfolio, the degree of confidence Yale possesses in a manager, and the appropriate asset size for a particular strategy. In addition, Yale attempts to exploit compelling undervaluations in countries, sectors, and styles by allocating additional capital and, perhaps, by hiring new managers to take advantage of the opportunities.

The Women’s Table (by Maya Lin, B.A. 1981, M.Arch.

1986, D.F.A. 1987) reflecting Berkeley College and William L. Harkness Hall.

Private Equity Private equity o≠ers extremely attractive long-term risk-adjusted return characteristics, stemming from the University’s strong stable of value-added managers that exploit market ine∞ciencies. Yale’s private equity investments include participations in venture capital and leveraged buy-out partnerships. The University’s target allocation to private equity of 19.0 percent far exceeds the 7.0 percent actual allocation of the average educational institution. In aggregate, the private equity portfolio is expected to generate real returns of 11.2 percent with risk of 27.7 percent. Yale’s private equity program, one of the first of its kind, is regarded as among the best in the institutional investment community. The University is frequently cited as a role model by other investors pursuing this asset class. Since inception, private equity investments have generated a 31.4 percent annualized return to the University. The success of Yale’s program led to a 1995 Harvard Business School case study—“Yale University Investments O∞ce”—by Professors Josh Lerner and Jay Light. The popular case study was updated in 1997, 2000, 2003, and again in 2006.

Yale’s private equity assets concentrate on partnerships with firms that emphasize a value-added approach to investing. Such firms work closely with portfolio companies to create fundamentally more valuable entities, relying only secondarily on financial engineering to generate returns. Investments are made with an eye toward long-term relation-ships—generally, a commitment is expected to be the first of several—and toward the close alignment of the interests of general and limited partners. Yale avoids funds sponsored by financial institutions due to the conflicts of interest and sta≠ instability inherent in such situations.

View through Phelps Gate, on Old Campus, toward the New Haven Green.

The Yale-China Association The Yale-China Association was founded in 1901 by a group of Yale University alum-ni and faculty members, motivated in part to honor the memory of Horace Tracy Pitkin (b.a. 1892), a Yale graduate who was killed during the Boxer Rebellion of 1900 while carrying out missionary work in China. Originally established as a non-denominational missionary society based in Changsha, Hunan, Yale-China was rein- The “Yali Middle School” campus photographed from the roof of the Xiangya Hospital in the 1930s. corporated in 1934 as a secular organization Yale-China founded the school in 1909 and continues to send Teaching Fellows to it today. with education as its principal objective.

Medical education and care became a leadership positions as possible, making facilities. In 1945, Yale-China sta≠ returned primary focus of Yale-China’s work in 1905 Yale-China a true joint Sino-American to the Changsha campus, but political with the arrival in Changsha of Edward H. enterprise. Hume’s endeavors in Changsha instability and a growing ambivalence Hume (b.a. 1897), who directed Yale- were assisted by Dr. Fuqing Yan, a 1909 toward foreigners made the future of the China’s medical work for two decades. Dr. graduate of the Yale School of Medicine. association uncertain. In 1951 the newly Hume’s medical clinic was eventually trans- From 1910 to 1926, Yan provided a critical formed Communist government took over formed into an educational compound that link between Chinese o∞cials and the Yale-China’s properties in Changsha, included a number of institutions founded Western community, and went on to serve breaking the association’s ties with main-by Yale-China, including the Yali Middle as China’s Minister of Health in the 1930s. land China. School, Xiangya Medical College, Xiangya Japan’s invasion of China in 1937 placed From 1951 to 1979 the Yale-China Nursing School, and Xiangya Hospital, an severe strains on Yale-China’s programs, Association directed its attention toward advanced teaching hospital built in 1916 especially the Xiangya Hospital, which Hong Kong. The association formed a with financial support from Edward S. cared for large numbers of casualties and partnership with New Asia College and, Harkness (b.a. 1897), a generous Yale war refugees. As the Chinese army retreat- with the support of the Ford Foundation University benefactor. ed to the southwest, the Yale-China insti- and several other U.S. non-profit organiza-The Yale-China Association made a tutions also evacuated to regions free of tions, resumed the practice of sending new dedicated e≠ort early on to bring as many Japanese occupation. Invading Japanese Yale College graduates to Asia to teach Chinese faculty and administrators into troops damaged many of the Changsha English, a program that remains in place. Yale-China assisted with the formation of the Chinese University of Hong Kong, securing funding for several new campus buildings and establishing the New Asia/ Yale-in-China Chinese Language Centre and the International Asian Studies Program. The relationship between the Yale-China Association and the Chinese University of Hong Kong remains strong to this day.

After the resumption of normal diplomatic relations with China in the 1970s, Yale-China explored the possibility of academic exchanges with a number of Chinese universities. In the fall of 1980, the association resumed its program of sending recent Yale College graduates to teach in mainland China and inaugurated a program of scholarly exchanges between faculty of the Yale School of Medicine and Xiangya.

Yale-China Teaching Fellow Max Gladstone (b.a. 2006) meets with students after class at Xiuning Middle School in rural Anhui province. Max is one of twenty Teaching Fellows that Yale-China placed in China in 2007.

Japan’s invasion of China in 1937 and the ensuing war placed severe strains on the Yale-China Association’s ability to operate. Surgeon Phillips Green is seen placing a U.S. flag on the roof of the Hongping Tian, director of health programs in the Yale-China Association, receives a gift of paintings from Xiangya Hospital, 1937. Until the bombing of Pearl a Chinese student whose school participates in a nutrition education program organized by the association. Harbor in 1941, Japanese bombers generally avoid-ed targeting American property.

In the nearly three decades since the Yale-China Association resumed its pro-grams in mainland China, the association’s activities have expanded to include a host of new initiatives in new locations.

Ventures between the association and China include programs in legal education, American Studies, HIV/AIDS education and prevention, community health education, health care for the underserved, and educational and cultural exchange for Yale students and their Chinese counterparts. Yale-China draws support from numerous generous benefactors, including Mrs.

Katharine R. Lyman, the widow of Richard S. Lyman (B.A. 1913), whose 1994 gift to Yale University directed a portion of the bequest to the Yale-China Association.

Yale-China’s work reaches dozens of members of the Yale community and thou-sands of people in China each year. Yale- The founders of medical operations of the Yale-China Association, Drs. F.C. Yen and Edward Hume China currently sponsors twenty Yale grad- (first and second from right) are seen with o∞cials of the Hunan government soon after the association uates serving as Yale-China Teaching was created in 1901. Attempts were made from the start to bring as many Chinese faculty and administra-tors on board as possible. Fellows, and in the summer of 2007 sent eleven Yale undergraduates to China to intern at non-profit organizations. In addition, more than fifteen faculty members from the Yale Schools of Nursing, Medicine, Public Health, and Law, as well as the Yale Teacher Preparation Program, will participate in Yale-China programs this year. True to its roots, the Yale-China Association continues to serve as a bridge for students and educators in the Yale com-munity and their colleagues in China.

Real Assets Real estate, oil and gas, and timberland share common characteristics: sensitivity to inflationary forces, high and visible current cash flow, and opportunity to exploit ine∞ciencies. Real asset investments provide attractive return prospects, excellent portfolio diversification, and a hedge against unanticipated inflation. Yale’s 28.0 percent long-term policy allo-cation significantly exceeds the average endowment’s commitment of 10.1 percent. Expected real returns are 6.0 percent with risk of 13.6 percent. The real assets portfolio plays a meaningful role in the Endowment as a powerful diversifying tool and a generator of strong returns. Real assets provide relative stability to the Endowment during periods of public market turmoil. Pricing ine∞ciencies in the asset class and opportunities to add value allow superior managers to generate excess returns over a market cycle. Since inception in 1978 the portfolio has returned 17.8 percent per annum.

The illiquid nature of real assets combined with the expensive and time-consuming process of completing transactions create a high hurdle for casual investors. Real assets provide talented investment groups with the opportunity to generate strong returns through savvy acquisitions and managerial expertise. A critical component of Yale’s investment strategy is to create strong, long-term partnerships between the Investments O∞ce and its investment managers. In the last decade Yale played a criti-cal role in the development and growth of more than a dozen organizations involved in the management of real assets.

Yale Educational Asset Allocations University Institution Mean Absolute Return 23.3% 19.5% Domestic Equity 11.0 26.3 Fixed Income 4.0 12.7 Foreign Equity 14.1 22.1 Private Equity 18.7 7.0 Real Assets 27.1 10.1 Cash 1.9 2.3 Data as of June 30, 2007 Spending Policy The spending rule is at the heart of fiscal discipline for an endowed institution. Spending policies define an institution’s compromise between the conflicting goals of providing substantial support for current operations and preserving purchasing power of Endowment assets. The spending rule must be clearly defined and consistently applied for the concept of budget balance to have meaning.

Yale’s policy is designed to meet two competing objectives. The first goal is to release substantial current income to the operating budget in a stable stream, since large fluctuations in revenues are di∞cult to accommodate through changes in University activities or programs. The second goal is to protect the value of Endowment assets against inflation, allowing programs to be supported at today’s level far into the future. Yale’s spending rule attempts to achieve these two objectives by using a long-term spending rate of 5.25 percent combined with a smooth-ing rule that adjusts spending gradually to changes in Endowment mar-ket value. The amount released under the spending rule is based on a weighted average of prior spending adjusted for inflation (80 percent weight) and an amount determined by applying the target rate to the cur-rent Endowment market value (20 percent weight) with an adjustment factor based on inflation and the expected growth of the Endowment net of spending.

Spending Growth Surpasses Inflation 1950–2007 $800 $700 $600 $500 Millions $400 $300 $200 $100 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 1950 Spending Inflated 1950 Spending from Subsequent Gifts Inflated Actual Spending Endowed Support for Yale-China Exchanges Yale University’s interaction with China and the Sally and Bob Gries Scholarship covers a range of activities involving stu- Fund (2005) for undergraduates (created dents, faculty, courses of study, and centers in 2005 by Robert D. Gries, B.A. 1951). for teaching and research. Since China and Donors have created endowments the United States re-established diplomatic specifically earmarked for Chinese students ties nearly thirty years ago, Yale has stood in professional schools at Yale. A bequest at the forefront of American universities from Ping The Sie (B.D. 1952) established a making commitments to work with their scholarship in the Divinity School for a Chinese counterparts. Although Yale Chinese student in 1988. Young artists receives a range of funding to establish and from China can seek support at the Yale operate programs with China, endowed School of Art from the Andrea Frank funds provide one of the most important Foundation Sanyu Scholarship Fund, sources of support for these activities. established by the Frank Foundation in 1998 in honor of Chinese artist Sanyu Support for Chinese Studies (1900 -1966). The Laura Cha (Shi Mei Lun) Scholarship at the Yale School of Until the improved diplomatic relations Management (2005) awards merit-based between the People’s Republic of China financial aid to one M.B.A. student from and the United States in the 1970s, Yale’s mainland China every other year. Other endowed funding of Chinese studies Yale School of Management scholarships remained modest. Older endowed funds S. Wells Williams, who had been a professor of Chinese language and literature at Yale from 1877 include the Kevin Y. Zhang Scholarship concentrated on support for students of to 1884, created the University’s first endowed Fund (2006), created by Mr. Zhang, M.B.A.

Chinese ancestry, the teaching of Chinese teaching fund for Chinese studies through a 1994, who came to SOM from China. His language and history, academic prizes, and bequest in 1903. fund is intended to increase the interna-book acquisitions. The focus of endowed tional diversity of the student body by pro-funding changed in 1977, when an endow- Fellowship Fund (1992) makes grants to viding half-tuition for a student from ment from the Andrew W. Mellon students from China “who intend to return mainland China.

Foundation helped to create a program in to their homeland upon completion of East Asian studies with an emphasis on their degree.” Similar endowed funds Support for Student Travel and Exchanges China, specifically in the humanities and include the Kwok Family Scholarship Fund social sciences. The Mellon Foundation (2000) for both graduate and undergradu- Today, Yale undergraduates and graduate went on to contribute a larger fund for the ate students, the Undergraduate students can apply for a number of fellow-same purpose in 1986. Scholarship Fund for Chinese and ships for study, research, or employment in Yale’s programs in Chinese studies Singaporean Students (1999, the gift of China for durations that range from a few attract international attention and support. Yale College parent Robert C. Ng), the Yale weeks to more than a year. Mrs. Richard S. In 1991, the Development of Chinese College Dean’s Discretionary Fund for (B.A. 1913) Lyman set up the Yale-China Studies Fund provided a total of $6 million Asian and International Students (2003), Fund (1994) to support students who go to from the Cheng Yu-tun Foundation and the Lee Shau-kee Foundation, the philanthropic e≠orts of two well-known Hong Kong businessmen, to endow Chinese studies in various forms: exchanges with the Chinese University of Hong Kong, fellowships, faculty research, library acquisitions, conferences, and financial support for Yale’s Council on East Asian Studies.

Founded in 1961, the council is just one of several programs that coordinate Chinese studies and programs related to China.

Support for Chinese Students A number of endowed funds have been established to bring international students and scholars to Yale. The Fan Family Fellowship Endowment (established in 1999 through gifts from Henry H.L. Fan), one of the most extensive programs of this kind, enables several Chinese students each year to complete doctoral, master’s, or Yale’s longstanding ties to China, and continuing financial support for the Yale-China Association, helped undergraduate degrees at Yale. The the University to step up activity promptly following the thaw in U.S.-China relations in the 1970s. Yale Kenneth and Mary Wang Graduate Professor of Surgery Bernard Lytton is seen lecturing at Hunan Medical College in 1983.

The spending rule has two implications. First, by incorporating the previous year’s spending, the rule eliminates large fluctuations, enabling the University to plan for its operating budget needs. Over the last twenty years, annual changes in spending have been a third as volatile as annual changes in Endowment value. Second, by adjusting spending toward the long-term target spending level, the rule ensures that spend-ing will be sensitive to fluctuating Endowment market values, providing stability in long-term purchasing power.

Despite the conservative nature of Yale’s spending policy, distributions to the operating budget rose from $191 million in fiscal 1997 to $684 million in fiscal 2007. The University projects spending of $843 million from the Endowment in fiscal 2008, representing 37 percent of revenues.

China to study or teach through programs international exchange under Yale’s Fox Demand from the Yale community for of the Yale-China Association. The Fellowship Program (established in 1988 access to Chinese studies and exchanges Raymond (b.a. 1975) and Nora Wong by Joseph Carrère Fox, B.A. 1938), which with China has increased dramatically over Summer Travel Fellowship Fund (2005) sends Yale graduate students to China and the last decade. The University continues provides funding for students to study, brings Chinese students to Yale. The Fox to seek endowed funding to maintain and work, travel, or conduct research in China. program is an important vehicle for the expand its vital work with China. For Yale A separate endowment, the Light Fellow- University’s projects with China and has —and for its generous benefactors—these ship, founded in 1997 by Dr. Richard continued to expand in recent years thanks funds provide an opportunity to make a Upjohn Light (B.A. 1924), has sent hun- to new endowment funding from Mr. Fox profound impact on the future of United dreds of Yale students to China for lan- and other contributors. States, China, and the world. guage studies.

The Schoen Foreign Study Fund, endowed through a gift from Scott A.

Schoen (B.A. 1980) and Laurie G. Schoen, provides support for the Peking-Yale Joint Undergraduate Program, which also receives funding from individual contributions of Yale alumni and parents. Founded in 2005, the program enables Yale College students and their counterparts at Peking University to study and live together in Beijing. Yale College students selected for the program take a full course load taught in English by Yale and Peking University faculty and receive full Yale credit toward their degrees.

University benefactors have provided a wealth of support for a broad range of stu-dent exchanges. The Pao-Watari Fund for East Asian Studies (2005) supports intern-ships for Yale students in non-profit educational and public policy organizations in China as well as Chinese and East Asian students who wish to come to New Haven for a period of study. This fund was estab-lished in 2005 through a gift from Ms. Cissy Pao and Mr. Shinichiro Watari, par-Alexander Millman (B.A. 2006) interviews a Chinese resident of Yunnan province as a part of the Yaleents of Yale College students (2001 and China Service Internship Program. The program receives support from the Pao-Watari Fund, which was 2005). For graduate study, Shanghai’s established in 2005 by a gift from Ms. Cissy Pao and Mr. Shinichiro Watari, parents of Yale College Fudan University participates in a yearlong students (2001 and 2005).

Chinese Art at Yale The Chinese Collection at the Yale dwelling, which dates back to the Eastern University Art Gallery was initiated in 1837 Han dynasty (first to second century C.E.). with a painting of David Wooster by an The single-storied, L-shaped house is an unknown Chinese artist. Building on this example of a Han mortuary object, which humble beginning, the Chinese collection is meant to facilitate the deceased’s transi-grew steadily over the next 170 years tion to the afterlife. The house provides through the gifts of alumni collectors, such Yale scholars and their colleagues with as Frederick Wells Williams (B.A. 1879), important information about the construc-one of the founders of the Yale-China tion of dwellings during the Eastern Han Association. period, as well as clues about attitudes The Yale-China Association indirectly facilitated the establishment of one of Yale’s most extraordinary collections of Chinese art, a collection of ceramics from the Changsha region of south central China.

In the mid 1930s, while spending two years teaching English on the Yale-China Association campus in Changsha, John Hadley Cox (B.A. 1935) witnessed the level-ing and excavation of a large area just out-side the city. The excavation uncovered numerous tombs and artifacts. Although Cox had no formal training in art or archaeology, he recognized the significance of the findings and began to amass an extensive collection.

Toward the end of his tenure in Changsha, Mr. Cox proposed a gift of forty ceramics to Yale in the hopes of stimulating an interest in “things Chinese” at the Finial or pole top (ca. 1300–1050 B.C.e., Shang dynasty, Yinxu period, thirteenth to eleventh cen-University. Yale enthusiastically accepted. tury B.C.e.), bronze. Hobart and Edward Small Over the next several decades, Yale’s Moore Memorial Collection, gift of Mrs. William Changsha ceramics collection grew to more H. Moore. Two heads, one human and one animal, than 200 pieces through the continued are joined back-to-back to constitute the upper half of this finial. generosity of Mr. Cox and the financial support of Ada Small Moore (also known as Mrs. William H. Moore). toward death, which, as the Han dynasty The Changsha ceramics collection docu- progressed, shifted from the pursuit of ments the evolution of Chinese ceramics in transcendent immortality toward a more the Changsha region from the third cen- materialistic approach that emphasized the tury B.C.E. to the fourteenth century C.E.. continuation of the comforts of worldly One of the most notable pieces in the col- life. lection is a ceramic model of a Chinese In addition to supporting Yale’s e≠orts to enlarge its collection of Changsha ceramics through monetary donations, Ada Small Moore made generous gifts to the Art Gallery from her extensive collection of Chinese art. Traveling frequently to East Asia with only her Irish maid in tow, Mrs.

Moore was an intrepid woman. In 1937 she donated her collection of Chinese textiles Wang Mian (Chinese, died 1359), Ink Plum to the University in memory of her son, (undated; ca. 1350s), hanging scroll, ink on paper. Hobart Moore (B.A. 1900). Over the next From the Hobart and Edward Small Moore Memorial Collection, a gift of Mrs. William H. eighteen years until her death in 1955, Mrs. Moore. Paintings of plum executed in ink devel-Moore continued to give works from her oped as a genre of painting particularly associated collection. In 1953 the name of the collec- with scholars during the late Northern Song period tion changed to include Edward Small at the end of the eleventh and the beginning of the Ceramic model of a Chinese dwelling, which dates twelfth century.

Moore (Yale 1900-1903), her second son. to the Eastern Han dynasty (first to second century C.E.). The single-storied, L-shaped house is an The gifts of Ada Small Moore and her example of a Han mortuary object. Changsha family are central to Yale’s collection of ceramics collection. Chinese art and include a number of generous benefactors. Yale’s Asian art colection is administered by two dedicated curators, one supported by a gift from Ruth and Bruce Dayton (B.A. 1940) and the other by The Japan Foundation Endowment through the Council on East Asian Studies. The collection not only serves as an important teaching tool for the University, but also draws acclaim and appreciation from the public and will undoubtedly continue to inspire generations of students as well as Chinese art enthusiasts, collectors, and researchers.

Portrait of Du Yan, one of the Five Old Men of Suiyang (before 1056, Northern Song dynasty, 960–1126), ink and color on silk. From the Hobart and Edward Small Moore Memorial Collection, a gift of Mrs. William H. Moore. The colophons range from 1056 to 1898, making this one of the most extensively documented paintings in the history of art.

notable pieces that span many dynasties. resentment toward the conquering One of the oldest pieces in the Hobart and Mongols of the Yuan dynasty, a sentiment Edward Small Moore Memorial Collection that was common among Chinese scholars is a finial/pole top dating back to the of that era.

Shang dynasty (sixteenth to eleventh cen- Over the last several decades, gifts have tury B.C.E.) of China’s Bronze Age. Two added substantially to the Art Gallery’s heads, one of a man and one of a tiger, are holdings of Chinese art. In 1982 the sup-fused back to back to form a striking orna- port of alumni and anonymous benefactors ment. The collection also includes a num- helped Yale acquire Reminiscence of the Jian ber of important paintings, of which one of River, a hanging executed in ink and color the most significant is Wang Mian’s Ink on paper by Dong Qichang, one of the Plum, a hanging scroll dating to the 1350s. most important painters and theorists in Dong Qichang (1555–1636), Reminiscence of Jian The artist’s images of plum blossoms cas- the history of later Chinese painting. River (ca. 1621), hanging scroll, ink, and color on cading in S-curves painted in ink combined The Chinese collection at Yale currently paper. Gift of Leonard C. Hanna, Jr. (B.A. 1913), and Mrs. Paul Moore, and the Anonymous Oriental with poems gave definitive shape to the contains roughly 2,500 pieces, many of Purchase Fund. Dong Qichang was the most genre of ink plum blossom painting. Wang which were given or financed by alumni, important painter and theorist in the history of Mian’s poetry and paintings expressed deep foundations, and the Art Gallery’s other later Chinese painting.

Investment Performance Yale has produced excellent investment returns. Over the ten-year period ending June 30, 2007, the Endowment earned an annualized 17.8 percent return, net of fees, placing it in the top one percent of large institutional investors. Endowment outperformance stems from sound asset allocation policy and superior active management.

Yale’s long-term superior performance relative to its peers and benchmarks has created substantial wealth for the University. Over the ten years ending June 30, 2007, Yale added $11.0 billion relative to its composite benchmark and $11.9 billion relative to the average return of a broad universe of college and university endowments.

Performance by Yale’s long-term asset class performance continues to be outstanding. In the past ten years every asset class posted superior returns, significantly Asset Class outperforming benchmark levels.

Over the past decade, the absolute return portfolio produced an annualized 13.1 percent, exceeding the passive benchmark of the One-Year Constant Maturity Treasury plus 6 percent by 2.5 percent per year and besting its active benchmark of hedge fund manager returns by 1.5 per-cent per year. For the ten-year period, absolute return results exhibited essentially no correlation to traditional marketable securities. For the decade ending June 30, 2007, the domestic equity portfolio returned an annualized 13.5 percent, outperforming the Wilshire 5000 by 5.8 percent per year and the Russell Median Manager return by 5.4 per-cent per year. Yale’s active managers have added value to benchmark returns primarily through stock selection.

Yale’s internally managed fixed income portfolio earned an annualized 6.4 percent over the past decade, exceeding the Lehman Brothers Treasury Index by 0.6 percent per year and the Russell Median Manager return by 0.5 percent per year. By making astute security selection deci-sions and accepting illiquidity, the Endowment benefited from excess returns without incurring material credit or option risk.

Yale’s Performance Exceeds Peer Results 1997 to 2007, 1997 = $1,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Endowment Mean of Broad Universe of Colleges and Universities Inflation The foreign equity portfolio generated an annual return of 16.9 percent over the ten-year period, outperforming its composite benchmark by 6.8 percent per year and the Russell Median Manager return by 6.2 percent per year. The portfolio’s excess return is due to e≠ective security selection and country allocation by active managers.

Results from Yale’s non-marketable assets demonstrate the value of superior active management. Private equity earned 33.9 percent annu-ally over the last ten years, outperforming the passive benchmark of University inflation plus 10 percent by 19.2 percent per year and the return of a pool of private equity managers compiled by Cambridge Associates by 12.8 percent per year. Since inception in 1973, the private equity program has earned an astounding 31.4 percent per annum.

Real assets generated a 21.5 percent annualized return over the ten-year period, outperforming the passive benchmark of University inflation plus 6 percent by 11.5 percent per year and an active benchmark of real assets manager returns by 7.6 percent per year. Yale’s outperformance is due to the successful exploitation of market ine∞ciencies and timely pursuit of contrarian investment strategies.

Yale Asset Class Results Trounce Benchmarks 1997—2007 40% 35% 30% 25% 20% 15% 10% 5% Absolute Return Domestic Equity Fixed Income Foreign Equity Private Equity Real Assets Yale Return Active Benchmark Passive Benchmark Active Benchmarks Passive Benchmarks Absolute Return: CSFB Composite Absolute Return: 1-year Constant Maturity Treasury + 6% Domestic Equity: Frank Russell Median Manager, U.S. Equity Domestic Equity: Wilshire 5000 Fixed Income: Frank Russell Median Manager, Fixed Income Fixed Income: Lehman Brothers Treasury Index Foreign Equity: Frank Russell Median Manager Composite, Foreign Equity: MSCI EAFE Index and MSCI EM Index Foreign Equity Composite Private Equity: Cambridge Associates Composite Private Equity: University Inflation + 10% Real Assets: NCREIF and Cambridge Associates Composite Real Assets: University Inflation + 6% President Hu Jintao and the Yale 100 Delegation In April 2006, Chinese President Hu Jintao paid Yale University an historic visit. Citing China’s relationship with Yale as evidence of a long-standing mutual admiration between China and the United States, President Hu stressed that Yale, by serving as an academic, cultural, and social link between the two countries, was in a unique position to foster amicable ties between the American and Chinese peoples.

In the spirit of advancing “mutual understanding between our two countries and especially between our young people,” President Hu Jintao visited Yale on April 21, 2006, President Hu concluded his speech by to give an address in Sprague Memorial Hall to students and faculty. President Hu also met with inviting one hundred Yale students, faculty, Yale President Richard C. Levin, who during one and administrators to visit China. of his six visits to China in recent years invited Enthusiastically accepting this unprece- President Hu to visit Yale. Addressing a crowd of dented invitation, the University spent a Yale College students, President Hu said, “If time full year preparing for the trip. The Yale could go back several decades, I would really like to be a student of Yale just like you.” The Chinese 100 set o≠ for China in May 2007. President’s historic visit continued the close Intended to provide a multi-faceted interactions between Yale and China going back introduction to China, the ten-day trip many years. blended o∞cial meetings with informal interactions and featured visits to multiple cities. President Hu welcomed his guests on their arrival with a formal banquet at the Great Hall of the People in Beijing.

Following the reception, the Yale delegation visited Peking and Tsinghua Universities to discuss education policy with administrators and students. The Yale 100 visited the Forbidden City and the Olympic Stadium, followed by a feast of Peking duck and a performance of Beijing opera. On their last day in Beijing, the del- Wendy Sharp, Director of Chamber Music at the In Beijing, a waiter serves tea to President Richard egates toured a museum dedicated to Zhan Yale School of Music, and Jody L. Sindelar, Levin, center, and Senior Lecturer Jane Levin in Tianyou (ph.b. 1881), the “father of the Professor of Epidemiology and Public Health, dramatic fashion. during the Yale 100 tour.

Chinese railroads.” There, the Yale 100 found plenty to remind them of home, from Zhan’s 1881 senior essay to nineteenth-century images of the familiar stained glass window in LinsleyChittenden 102. The Yale delegation’s Chinese hosts arranged for an extended trip outside the capital city. First on the stop was Xi’an, where Yale students got a glimpse of a typical Chinese household. After a visit to see the terracotta warriors and a day in the rural outskirts of the city, the Yale 100 proceeded to Shanghai, where delegation members marveled at the scale of construction and the energy of the city’s stock exchange.

President Levin described the experience as an “extraordinary journey” and encouraged members of the Yale delegation to consider returning to China for work or A delegation of 100 Yale students, faculty members, and administrators made a ten-day trip to China in scholarship. Without a doubt, the Yale 100 May 2007, responding to the o∞cial invitation of President Hu Jintao in the conclusion to his address at will not soon forget their exceptional intro- Yale the year before. The trip was intended, said President Hu, to advance “mutual understanding between duction to China. our two countries and especially between our young people.”

Management and Since 1975, the Yale Corporation Investment Committee has been responsible for oversight of the Endowment, providing senior-level governance Oversight over investment management activities. The Investment Committee con- sists of at least three Fellows of the Corporation and other persons who have particular investment expertise. The Committee meets quarterly, at which time members review asset allocation policies, Endowment performance, and strategies proposed by Investments O∞ce sta≠. The Committee approves guidelines for investment of the Endowment port-folio, specifying investment objectives, spending policy, and approaches for the investment of each asset category. Twelve individuals currently sit on the Committee.

Investment Committee Charles D. Ellis ’59, Chairman Henry F. McCance ’64 Former Managing Partner Chairman Greenwich Associates Greylock Management G. Leonard Baker ’64 Jane L. Mendillo ’80, ’84 MBA Managing Director Chief Investment O∞cer Sutter Hill Ventures Wellesley College Joshua Bekenstein ’80 William I. Miller ’78 Managing Director Chairman Bain Capital Irwin Financial Corporation Shauna King Honorable Barrington Parker Vice President Finance & Administration ’66, ’69 ll.b.

Yale University Judge United States Court of Appeals for the Second Circuit James Leitner ’75 President Douglas A. Warner, III ’68 Falcon Investment Management Former Chairman of the Board J.P. Morgan Chase & Co.

Richard C. Levin ’74 Ph.D.

President Yale University Fareed Zakaria ’86 Editor Newsweek International The Investments O∞ce manages the Endowment and other University financial assets, and defines and implements the University’s borrowing strategies. Headed by the Chief Investment O∞cer, the O∞ce currently consists of nineteen professionals.

Investments O∞ce David F. Swensen ’80 Ph.D. Anne Martin Chief Investment O∞cer Associate Director Dean J. Takahashi ’80, ’83 MPPM Suzanne K. Wirtz Senior Director Associate Director Alexander C. Banker David B. Slifka ’01 Director Senior Associate Alan S. Forman Celeste P. Benson Director Senior Portfolio Manager Timothy R. Sullivan ’86 Carrie A. Abildgaard Director Senior Financial Analyst Deborah S. Chung Nicholas T. Shalek ’05 Associate General Counsel Senior Financial Analyst Kenneth R. Miller ’71 Xiaoning Wu ’04 Associate General Counsel Senior Financial Analyst Peter H. Ammon ’05 MBA, ’05 MA R. Alexander Hetherington ’06 Associate Director Financial Analyst Michael E. Finnerty Matthew S. T. Mendelsohn ’07 Associate Director Financial Analyst Randy Kim ’98, ’04 MBA Associate Director Autumn on the Old Campus, with the statue of Rector Abraham Pierson (1641/5-1707), Yale College’s first rector, who served from 1701 to 1707.

The Qualified Foreign Institutional Investor Program For over a decade after its establishment in December 1990, the Chinese public equity market was essentially closed to foreign investors. In late 2002 the Chinese govern-ment initiated the Qualified Foreign Institutional Investor (QFII) program, allowing a limited group of non-Chinese institutions to own domestically listed companies, also known as A-shares.

The China Securities Regulatory Commission and the State Administration of Foreign Exchange (SAFE), two bodies that govern financial markets and currency flows, set an initial quota of $4 billion to be divided among approved QFII partici- Cubicles for traders at the Shanghai Stock Exchange. The Yale 100 tour in May 2007 (discussed on page 22) included a visit to the exchange. pants. Interest in the QFII was high; foreign investors soon consumed the existing Located in the Hunanese city where the investment perspective enables the quota and in 2005, in recognition of the Yale-China Association* established its University to take a contrarian view, with heavy investor demand for access to A- headquarters, Changsha Zoomlion was the recognition that market fluctuations do shares, the Chinese government approved founded by Dr. Zhan Chunxin in 1992 as a not a≠ect the fundamental strengths of an expansion of the QFII quota to $10 small division of the Changsha Construc- good businesses. In addition to maintain-billion. tion Machinery Research Institute. Buoyed ing a disciplined, long-term focus,Yale Yale’s application for $50 million in A- by China’s infrastructure boom, Zoomlion emphasizes fundamental research, which is share quota was approved on April 14, has seen demand for its products soar. The imperative to understanding and navigat-2006, making the University the first for- company is headed by a savvy management ing largely unexplored emerging markets. eign educational institution to receive a team that has built strong sales channels Yale expects to maintain a long-term comQFII license. As of August 2007, Chinese and fostered an environment that encour- mitment to Chinese equities. authorities have approved 51 QFII partici- ages technology research and development. pants with quotas that aggregate to the Zoomlion’s focus on innovation and e∞- * Founded in 1901, the Yale-China Association is a maximum allowable of $10 billion. ciency have led to impressive earnings private, non-profit organization dedicated to pro-A strong market environment and supe- growth. moting education in China and fostering cooperation between Chinese and American students, acarior active management led the Endow- Market volatility will undoubtedly occur demics and professionals. For information about ment’s A-share investments to appreciate (and oftentimes quite violently) in emerg- the organization, please see “The Yale-China significantly. In fiscal 2007, Yale’s A-share ing markets like China. Yale’s long-term Association” article in this publication. portfolio outperformed the market by a healthy margin, no easy feat in a year when the Morgan Stanley Capital International A-share Index returned a jaw-dropping 196%. With approximately 1,400 listed companies, many of which are unknown to foreign investors, the A-share market is particularly well suited to Yale’s approach of pursuing research-intensive active management of publicly traded equities. Yale holds a concentrated portfolio of A-share companies run by exemplary management teams that are uniquely positioned to benefit from China’s economic growth. Two such holdings are department store operator Guangzhou Friendship Company and construction machinery manufacturer Changsha Zoomlion.

Guangzhou Friendship Company is a premier shopping destination for luxury goods, a market that has grown tremendously in the past decade. Friendship’s department stores benefit from occupying prime locations in the city, providing the company with a key advantage over On April 14, 2006, Yale became the first foreign educational institution authorized to own domestically competitors. listed Chinese companies, also known as A-shares, as attested by this certificate from the China Securities Regulatory Commission and the State Administration of Foreign Exchange (SAFE), two bodies that govern financial markets and currency flows. Yale’s portfolio of Chinese shares performed favorably in 2007.

Yale and China Joint Programs Yale currently maintains more than eighty joint ventures with Chinese universities, facilitating a lively and mutually beneficial series of exchanges in the classroom, laboratory, and studio. The joint ventures provide a platform for innovative research and collaboration across a wide range of academic disciplines. The following programs represent only a handful of Yale’s many joint projects with China.

The China Law Center at Yale Yale Law School spearheaded one of the University’s first long-term joint ventures in China. Paul Gewirtz, the Potter Stewart Professor of Constitutional Law at Yale, founded the China Law Center in 1999 to assist China’s e≠orts at judicial reform and increase knowledge of the country’s legal system. Led by members of the Law School sta≠, projects of the China Law Center Yale’s China Law Center was established in 1999 by Professor Paul Gewirtz to foster cooperative projects have focused on e≠orts by legislatures, with leading Chinese legal experts in the areas of judicial reform, criminal law, administrative law, regula-scholars, lawyers, and advocates to pro- tory reform, and legal education. Professor Gewirtz, the Potter Stewart Professor of Constitutional Law at mote reforms to improve fairness, Yale, is shown with Zeng Xianyi, then Dean of the Renmin University Law School, during a lecture series e≠ectiveness, and rights-protection in in Beijing in 2003 sponsored by the Yale China Law Center. China’s criminal justice system. The center has worked to encourage positive steps in recent years by China’s Supreme People’s Court to increase the transparency of court proceedings, strengthen the authority of trial judges, and encourage more active participation by litigants and their lawyers.

In addition to the China-based activity, the joint venture created opportunities for Yale students in New Haven: the Workshop on Chinese Legal Reform, a course o≠ered at Yale Law School each fall in conjunction with the China Law Center, provides Yale students and faculty an opportunity to learn about the Chinese legal system.

In 2007, in recognition of the work of the China Law Center of Yale Law School, the William and Flora Hewlett Foundation announced a grant of $10 million to sup-port the center’s operations for five years. The 2007 Hewlett Foundation grant recognizes the Law Center’s strong record of The China-Yale Advanced University Leadership Program (CYAULP) was initiated in 2004 for presidents accomplishment in designing and carrying and vice-presidents from China’s leading universities. It is the most senior group of Chinese university out cooperative projects between U.S. and leaders ever to participate in an executive education program outside of China. In collaboration with China’s Ministry of Education, the CYAULP was developed in response to the aspiration expressed in 1998 Chinese experts on key issues of Chinese by China’s President Jiang Zemin to transform a small number of Chinese institutions into “world-class law and policy reform. Yale Law School’s universities.” Participants from China are shown during sessions at Yale in August 2004. China Law Center recently hosted a major academic conference, which focused on sexual orientation and related policy issues.

The conference was called “Diversity, Equality and Harmony: International Workshop on Sexuality, Policy and Law” and was held in conjunction with Fudan University in Shanghai in January, 2006.

The Fudan-Yale Biomedical The Peking-Yale Joint Center for The Yale School of Management Research Center Microelectronics and Nanotechnology and China University President Richard Levin In fall 2005, Yale and Peking University A number of professors from the Yale o∞ciated at the opening of The Fudan-Yale launched a joint research center in micro- School of Management (SOM) conduct Biomedical Research Center on the Fudan electronics and nanotechnology. research on topics in Chinese finance, University Shanghai campus in November Combining the expertise of faculty mem- including: William Goetzmann, who 2003. Under the direction of Professor Tian bers from both universities with the facili- researches the development of corporations Xu of the Yale School of Medicine’s ties and human resources of Peking in pre-revolutionary China; Chen Zhiwu, Genetics Department, this joint initiative of University, the Peking-Yale Joint Center for who collaborates with colleagues from sev-Yale and Fudan University uses model Microelectronics and Nanotechnology sup- eral Chinese universities and institutions to organisms to study developmental biology ports a multidisciplinary research program study market efficiency and the history of and human diseases while pursuing three in which independent research groups capital markets in Greater China; and Lode main goals: to perform cutting-edge work within a common facility, sharing Li, who analyzes supply-chain manage-research and training; to serve as a model resources and expertise. The center ment issues in Hong Kong and other East for academic reform; and to promote inter- engages in the synthesis, manipulation, Asian countries. SOM provides students an national exchange and cooperation. The measurement, analysis, and modeling of opportunity to study the Chinese business center has produced exceptional research, electronic materials and devices on a environment first-hand through the including a project that was featured on the molecular scale. Funding comes from the International Experience China Trip. cover of the August 12, 2005 issue of Cell, a two sponsoring universities and the local Established in 2006, the trip allows prominent scientific journal. municipality in which it operates. E≠orts approximately twenty students, led by The Center has three professors, three are under way to procure additional sup- Professor Zhiwu Chen, to meet with busi-associate professors, and approximately port from industrial sponsors as well as ness and government leaders in Beijing and twenty postgraduate fellows and doctoral individual donors. Shanghai for a period of ten days. In 2008, students. Fudan University recently added Yale is committed to building lasting Yale SOM will present an educational pro-10,000 square meters of laboratory space partnerships with Chinese universities. gram for senior executives set to take place and will provide an auditorium and facili- Yale’s joint programs with Chinese univer- against the historical backdrop of the ties for the conduct of videoconferences sities facilitate robust intellectual exchange, Beijing Olympics. The program will feature and televisual seminars. The Center’s semi- allowing students, researchers, and profes- some of Yale’s leading professors on China nar series has hosted sessions with more sors from the United States and China to business issues, leadership, globalization, than forty internationally renowned schol- explore new frontiers in the sciences and economics, and competitive strategy, as ars, including four Nobel laureates in the humanities. well as several of the world’s most promi-genetics field. nent CEOs.

The Advanced University Leadership Program In August 2004, Yale welcomed senior administrators from seven of China’s top universities for the China-Yale Advanced University Leadership Program. In the first event of its kind outside of China, Yale and the Chinese Ministry of Education spon-sored a two-week training program for Chinese university administrators on a broad range of topics, including faculty recruitment, department structure, and endowment management. In 2005, the program was again held at Yale and in 2006, the program continued for a third year in China. The Advanced University Leadership Program reinforced long-stand-ing ties between Yale and China, providing further evidence of Yale’s commitment to work hand-in-hand with the Chinese university community. Since 2001, Yale has established four joint centers for cooperative teaching and research in the biological sciences with Peking University and with Fudan University in Shanghai. Here President Levin is shown touring the Peking-Yale Joint Center for Plant Molecular Genetics and Agro-Biotechnology, in Beijing, with its director, Professor Xing-Wang Deng, the Daniel C. Eaton Professor of Plant Biology at Yale.

Sources Photo Credits Financial and Investment Information Endowed Support for Yale-China Exchanges Front cover: Steve Dunwell Photography, Inc., Boston Much of the material in this publication is Information from Yale Development O∞ce. Back cover: Bodhisattva Guanyin drawn from memoranda produced by the Yale University Art Gallery Investments O∞ce for the Yale Corporation Chinese Art at Yale Investment Committee. Other material comes Pages 1, 10, 11, 22 (top and middle), Mary Gardner Neill, The Communion of from Yale’s financial records, Reports of the 24, 26 (bottom), inside back cover Scholars: Chinese Art at Yale (New York: Treasurer, and Reports of the President. Michael Marsland, O∞ce of Public A≠airs China House Gallery, China Institute in Pages 6-7, 10-11, 14 America, 1982).

Pages 8 (top, painting of Yung Wing by Educational institution asset allocations and David Ake Sensabaugh, Scholar as Collector: Judith Reeve), 12-13, 16 (bottom), 17 returns from Cambridge Associates.

Chinese Art at Yale (New Haven: Yale Yale-China Association Page 20 University Art Gallery, 2004).

Page 8 (bottom), 9, 16 (top) The Endowment’s annual return for the ten Sterling Memorial Library Manuscripts years ending June 30, 2007 ranks in the top President Hu Jintao and the and Archives one percent of institutional funds as meas- Yale 100 Delegation ured by the SEI Large Plan Universe. Pages 18-19 Yale O∞ce of International A≠airs Yale University Art Gallery Yale 100 Delegation Sources for Stories on Yale and China Yale O∞ce of Public A≠airs Pages 22 (middle, bottom), 25 (top) Yung Wing and the Chinese Yale 100 Delegation, Educational Mission Yale and China Joint Programs Michael Blank, photographer Yung Wing, My Life in China and America Information from each of the Centers Page 25 (bottom) (New York: Henry Holt and Co., 1909). included in the report China Securities Regulatory Commission and Yale School of Management the State Administration of Foreign Exchange Harold Koh, “Yellow in a White World,” Yale O∞ce of International A≠airs Speech at the Asian American Cultural Page 26 (top) Center, Yale University, September 27, 2004, Yale China Law Center Individuals to celebrate the 150th anniversary of Yung Wing’s graduation from Yale College. The Yale Investments O∞ce expresses appre-O∞ce of International A≠airs ciation to the following individuals who provided helpful information: Design Beatrice Bartlett, Professor Emeritus Strong Cohen/DJP chinesestudentsfeature111206.pdf of History /2004_11/old_yale.html Je≠rey Prescott, China Law Center at Yale David Sensabaugh, Yale University Art The Yale-China Association Gallery Nancy E. Chapman and Jessica C. Plumb, The Yale-China Association: A Centennial History (Hong Kong: Chinese University Press, 2001).

Opposite page: Stained-glass windows in Yale Law School.

Back cover: Bodhisattva Guanyin (1168, Jin dynasty, 1115–1234), polychromed wood with gilt. Gift of Winston F. C.

Guest (B.A. 1927). Guanyin, Sound Observer, or Guanshiyin, the One Who Observes the Sounds of the World, is the Chinese name for Avalokitesvara, the compassionate bodhisattva who has been worshiped throughout the Buddhist world and later became a god of mercy although Guanyin often takes the female form. Guanyin’s identifying attribute is the small image of the Buddha Amitabha seen in his crown.