Keep pulling the thread on Tim Sullivan.
The Yale Endowment's assets under management grew from $1.75 billion to over $40 billion during Tim Sullivan's tenure.
Following the 1987 stock market crash, David Swenson insisted the Yale Endowment rebalance its portfolio by buying equities, despite the investment committee chairman's belief that it was a repeat of 1929.
During the dot-com bubble, venture firms that managed $200 million funds in 1995 were managing billion-dollar funds by 1999 and deploying them in as little as nine months.
In 2020 and 2021, private equity buyout firms routinely paid over 20 times EBITDA for quality businesses, a price Tim Sullivan believes was too high.
Tim Sullivan believes it will be very difficult for private equity and venture capital to be the primary alpha-generating strategy for institutional investors over the next 35-40 years as it has been in the past.
The balance of power in venture capital has shifted from VCs to entrepreneurs, with firms like Sequoia and Kleiner Perkins now investing larger sums (e.g., $50 million) for smaller stakes (e.g., 3%), a reversal from the past when they could invest $3 million for a 30% stake.
When Tim Sullivan joined the Yale Endowment, the investment office had approximately five investment professionals, compared to over 50 today.
In the mid-1980s, venture capital and leveraged buyouts combined constituted approximately 2% of the Yale Endowment's total assets.
By the mid-1980s, the Yale Endowment had already established investment relationships with preeminent Silicon Valley and Boston venture firms including Sequoia, Kleiner Perkins, and Mayfield.
The Yale Endowment's early private equity strategy focused on buyout firms that brought operational capabilities to portfolio companies, not just financial engineering skills.
The KKR acquisition of RJR Nabisco, and the subsequent negative perception of LBOs, created a favorable investment environment for the Yale Endowment to deploy capital into leveraged buyout firms.
The leveraged buyout of RJR Nabisco by KKR proved to be a mediocre deal for the firm.