Business
Yale’s Endowment Selling Private Equity Stakes as Trump Targets Ivies
Yale University’s famed endowment has been trying to offload one of the largest portfolios of private equity investments ever in a single sale, a move that reflects the pressures on both Wall Street and higher education under the Trump administration.
The Ivy League school has sought buyers for up to $6 billion in stakes in private equity and venture funds, according to three people briefed on the sales process, amid uncertainty about its federal funding and the reality that many of these investments have not delivered the outsize returns that Yale expected.
Yale is now close to completing a sale of roughly $3 billion of the portfolio and is selling the assets at a slight discount, one of the people said.
“This is a big deal,” said Sandeep Dahiya, a professor of finance at Georgetown University who has conducted research on the performance of endowments. “The investor that was the lead architect of investing in the private equity markets is pulling in its horns.”
For decades, Yale has been regarded as a pioneer for shifting its investments away from stocks and bonds into longer-term holdings managed by private equity and venture capital firms. But last year, Yale’s $41 billion endowment generated returns of just 5.7 percent, underperforming the S&P 500 and other major indexes. Yale said its 10-year return averaged 9.5 percent annually.
Private equity investments typically generate cash for endowments and other investors after they sell or take public the companies in which they have invested. But lately, private equity and venture firms, which make up about half of Yale’s endowment, have struggled to sell their stakes in companies and return cash to investors. That has driven down returns.
Yale’s quest to exit investments in both well-known firms like Bain Capital and lesser-known ones like Golden Gate Capital, Clayton Dubilier & Rice and Insight Partners is a sharp U-turn for an endowment that has long proselytized the value of private equity and other long-term investments.
Knowing that some stakes would be harder to sell than others, Yale’s bankers offered potential bidders two separate lists of funds: “core” funds, the ones they most wanted to sell, and “sweeteners,” the better-performing ones, according to two of the people briefed on the sale.
While buyers would receive only a small discount of about 5 percent on the private equity stakes, Yale willingness to sell assets that were once highly desirable at less than full value reflects the industry’s challenges.
The sale comes at a critical juncture for universities. While President Trump has spared Yale the kind of punitive funding cuts he has leveled against other Ivy League schools such as Harvard, Yale is grappling with decreases in federal research funding that have hit higher education broadly. Republicans in Congress have also proposed steep tax increases on endowments.
Yale is on track to spend roughly $2.1 billion from its endowment in 2025, which accounts for just over one-third of its annual budget.
In a statement provided to The New York Times, a representative for the Yale endowment acknowledged the sale, but called private equity “a core element of our investment strategy.” The statement added, “We are not reducing our long-term target to private equity.” The university said it was also looking to invest in other private equity firms.
Yale’s bankers tried to keep the process discreet by giving the sale the code name Project Gatsby. (Two of the main characters in F. Scott Fitzgerald’s novel set in the roaring 1920s went to Yale.) But Yale’s move is widely viewed on Wall Street as a harbinger.
At least two other large universities are preparing to sell some private equity assets, and dozens of U.S. and Asian pension funds are also looking at exits.
Lawrence Siegel, a former director of research at the Ford Foundation, called Yale’s move “a wake-up call” for investors.
“It’s also Yale trying to get out before everyone else,” Mr. Siegel said.
The Swensen Model
When David Swensen, a former Lehman Brothers banker, joined Yale as its chief investment officer in 1985, the university’s endowment was valued at about $1.3 billion. (Harvard’s had $2.7 billion.)
During 2021, the year that Mr. Swensen died, Yale’s endowment had swelled to $42.3 billion, behind Harvard but billions ahead of almost every other university endowment.
To achieve that, Mr. Swensen shifted Yale’s investments from a traditional portfolio of 60 percent stocks and 40 percent bonds. After getting to know fund managers in private equity and venture firms, Mr. Swensen moved a relatively large slug of Yale’s endowment into long-term assets, often investing in those funds for decades.
Other universities watched Yale’s returns and started to follow the Swensen Model, as it came to be known.
Yale’s early affection for private equity provided the perfect advertisement for an industry looking to attract new investors.
“Do you want to be smart like Yale?” said Ludovic Phalippou, an economist at the University of Oxford, in describing the pitch.
University endowments now invest an average of about 17.1 percent of assets in private equity funds, according to studies by the National Association of College and University Business Officers. That’s up from just 5.4 percent in 2007 before the financial crisis.
Universities and private equity firms have developed a symbiotic relationship. Endowments typically pay private equity firms roughly 2 percent of the money they manage and 20 percent of the profits they generate.
Those fees have helped mint slews of billionaires, many of whom sit on university boards and make large donations to the schools.
Yale’s senior trustee, for example, Joshua Bekenstein, has worked at Bain Capital since its inception in 1984, four years after he graduated from Yale. The Boston-based firm was one of the earliest to jump into the buyout business. It scooped up companies like Dunkin’ Donuts, Clear Channel Communications and Gymboree, added debt and then tried to sell them for a profit. Gymboree, a children’s clothing retailer, filed for bankruptcy seven years after Bain bought it.
Bain now manages $185 billion, including at least roughly $1 billion for Yale.
For more than a decade after the financial crisis, U.S. private equity firms reliably generated average returns, on paper, in the mid- to high teens, according to the data provider PitchBook. But the firms generated average returns below 10 percent in 2022 and 2023, and just over 10 percent in 2024.
Another challenge: Deal making has been slow for several years, and private equity firms have had difficulty selling stakes in companies and returning cash to investors at levels reached in previous years. Despite optimism that the second Trump administration would spur a deal-making resurgence, the volatility around tariffs has made companies wary.
In 2024, the firms returned about 15 percent of the value of their funds to investors in cash, compared with between 25 and 35 percent in prior years, PitchBook data shows.
The winnowing returns come after private equity firms, from 2021 to 2024, raised record sums from pensions, endowments and sovereign wealth funds, PitchBook data shows.
Steven Meier, chief investment officer for the New York City Retirement System, acknowledged that returns for private equity “haven’t been great.”
The system, which manages a $280 billion investment portfolio for the pensions of teachers, firefighters and other public employees, just sold $5 billion of its stakes in private equity firms. Mr. Meier said the city would continue investing in private equity but was looking to pay lower fees.
He added that the funds’ recent returns to pensions and endowments had also been “disappointing.”
Project Gatsby
When Yale’s bankers at Evercore Partners began shopping the endowment’s private equity portfolio in April, they didn’t disclose the seller’s identity.
But they left a clue: They called the sale Project Gatsby.
Bidders were asked to select funds from a combination of the “sweetener” and the “core” pool of assets and to name their price by May 6, with Yale’s bankers aiming for a June 30 closing, according to sales documents viewed by The Times.
Some details of Yale’s sale were reported earlier by Secondaries Investor and Bloomberg.
The biggest single position that Yale has been shopping is a roughly $600 million stake in a 2007 fund run by Golden Gate Capital, a San Francisco-based private equity firm known mostly for investing in retailers like Ann Taylor, Eddie Bauer and PacSun. Two people familiar with the sale said Yale did not expect to sell the entire stake.
The Golden Gate stake was marketed as part of the core portfolio, among the assets that the bankers most wanted to sell.
Evercore’s bankers also offered stakes in Insight Partners and General Catalyst. At least one stake that was labeled a “sweetener,” Clayton, Dubilier & Rice, was not expected to be sold because Yale has been able to get the price that it wanted on other stakes, according to two people familiar with the sale.
Yale has also been offering to sell nine funds managed by Bain Capital, with a total value of about $1 billion. A person familiar with the deal said the school was on the verge of selling about $500 million worth of those Bain stakes.
The sale of Warner Bros. — whether in pieces to Netflix or in its entirety to Paramount — is stirring mounting worries among Hollywood union leaders about the possible fallout for their members.
Unions representing writers, directors, actors and crew workers have voiced growing concerns that further consolidation in the media industry will reduce competition, potentially causing studios to pay less for content, and make it more difficult for people to find work.
“We’ve seen this movie before, and we know how it ends,” said Michele Mulroney, president of the Writers Guild of America West. “There are lots of promises made that one plus one is going to equal three. But it’s very hard to envision how two behemoths, for example, Warner Bros. and Netflix … can keep up the level of output they currently have.”
Last week, Netflix announced it agreed to buy Warner Bros. Discovery’s film and TV studio, Burbank lot, HBO and HBO Max for $27.75 a share, or $72 billion. It also agreed to take on more than $10 billion of Warner Bros.’ debt. But Paramount, whose previous offers were rebuffed by Warner Bros., has appealed directly to shareholders with an alternative bid to buy all of the company for about $78 billion.
Paramount said it will have more than $6 billion in cuts over three years, while also saying the combined companies will release at least 30 movies a year. Netflix said it expects its deal will have $2 billion to $3 billion in cost cuts.
Those cuts are expected to trigger thousands of layoffs across Hollywood, which has already been squeezed by the flight of production overseas and a contraction in the once booming TV business.
Mulroney said that employment for WGA writers in episodic television is down as much as 40% when comparing the 2023-2024 writing season to 2022-2023.
Executives from both companies have said their deals would benefit creative talent and consumers.
But Hollywood union leaders are skeptical.
“We can hear the generalizations all day long, but it doesn’t really mean anything unless it’s on paper, and we just don’t know if these companies are even prepared to make promises in writing,” said Lindsay Dougherty, Teamsters at-large vice president and principal officer for Local 399, which represents drivers, location managers and casting directors.
Dougherty said the Teamsters have been engaged with both Netflix and Paramount, seeking commitments to keep filming in Los Angeles.
“We have a lot of members that are struggling to find work, or haven’t really worked in the last year or so,” Dougherty said.
Mulroney said her union has concerns about both bids, either by Netflix or Paramount.
“We don’t think the merger is inevitable,” Mulroney said. “We think there’s an opportunity to push back here.”
If Netflix were to buy Warner Bros.’ TV and film businesses, Mulroney said that could further undermine the theatrical business.
“It’s hard to imagine them fully embracing theatrical exhibition,” Mulroney said. “The exhibition business has been struggling to get back on its feet ever since the pandemic, so a move like this could really be existential.”
But the Writers Guild also has issues with Paramount’s bid, Mulroney said, noting that it would put Paramount-owned CBS News and CNN under the same parent company.
“We have censorship concerns,” Mulroney said. “We saw issues around [Stephen] Colbert and [Jimmy] Kimmel. We’re concerned about what the news would look like under single ownership here.”
That question was made more salient this week after President Trump, who has for years harshly criticized CNN’s hosts and news coverage, said he believes CNN should be sold.
The worries come as some unions’ major studio contracts, including the DGA, WGA and performers guild SAG-AFTRA, are set to expire next year. Two years ago, writers and actors went on a prolonged strike to push for more AI protections and better wages and benefits.
The Directors Guild of America and performers union SAG-AFTRA have voiced similar objections to the pending media consolidation.
“A deal that is in the interest of SAG-AFTRA members and all other workers in the entertainment industry must result in more creation and more production, not less,” the union said.
SAG-AFTRA National Executive Director Duncan Crabtree-Ireland said the union has been in discussions with both Paramount and Netflix.
“It is as yet unclear what path forward is going to best protect the legacy that Warner Brothers presents, and that’s something that we’re very actively investigating right now,” he said.
It’s not clear, however, how much influence the unions will have in the outcome.
“They just don’t have a seat at the ultimate decision making table,” said David Smith, a professor of economics at the Pepperdine Graziadio Business School. “I expect their primary involvement could be through creating more awareness of potential challenges with a merger and potentially more regulatory scrutiny … I think that’s what they’re attempting to do.”
Businessman Brian Kahn has pleaded guilty to conspiracy to commit securities fraud in a case that brought down a hedge fund, helped lead to the bankruptcy of a retailer and damaged West Los Angeles investment bank B. Riley Financial.
Kahn, 52, admitted in a Trenton, N.J., federal court Wednesday to hiding trading losses that brought down Prophecy Asset Management in 2020. The Securities and Exchange Commission alleged the losses exceeded $400 million.
An investor lawsuit has accused Kahn of funneling some of the fund’s money to Franchise Group, a Delaware retail holding company assembled by the investor that owned Vitamin Shoppe, Pet Supplies Plus and other chains.
B. Riley provided $600 million through debt it raised to finance a $2.8-billion management buyout led by Kahn in 2023. It also took a 31% stake in the company and lent Kahn’s investment fund $201 million, largely secured with shares of Franchise Group.
Kahn had done deals with B. Riley co-founder Bryant Riley before partnering with the L.A. businessman on Franchise Group.
However, the buyout didn’t work out amid fallout from the hedge fund scandal and slowing sales at the retailers. Franchise Group filed for bankruptcy in November 2024. A slimmed-down version of the company emerged from Chapter 11 in June.
B. Riley has disclosed in regulatory filings that the firm and Riley have received SEC subpoenas regarding its dealings with Kahn, Franchise group and other matters.
Riley, 58, the firm’s chairman and co-chief executive, has denied knowledge of wrongdoing, and an outside law firm reached the same conclusion.
The failed deal led to huge losses at the financial services firm that pummeled B. Riley’s stock, which had approached $90 in 2021. Shares were trading Friday at $3.98.
The company has marked down its Franchise Group investment, and has spent the last year or so paring debt through refinancing, selling off parts of its business and other steps, including closing offices.
The company announced last month it is changing its name to BRC Group Holdings in January. It did not immediately respond to requests for comment.
At Wednesday’s plea hearing, Assistant U.S. Atty. Kelly Lyons said that Kahn conspired to “defraud dozens of investors who had invested approximately $360 million” through “lies, deception, misleading statements and material omissions.”
U.S. District Judge Michael Shipp released Kahn on a $100,000 bond and set an April 2 sentencing date. He faces up to five years in prison. Kahn, his lawyer and Lyons declined to comment after the hearing.
Kahn is the third Prophecy official charged over the hedge fund’s collapse. Two other executives, John Hughes and Jeffrey Spotts, have also been charged.
Hughes pleaded guilty and is cooperating with prosecutors. Spotts pleaded not guilty and faces trial next year. The two men and Kahn also have been sued by the SEC over the Prophecy collapse.
Bloomberg News contributed to this report.
Chatty bots are sharing their hot takes through hundreds of thousands of AI-generated podcasts. And the invasion has just begun.
Though their banter can be a bit banal, the AI podcasters’ confidence and research are now arguably better than most people’s.
“We’ve just begun to cross the threshold of voice AI being pretty much indistinguishable from human,” said Alan Cowen, chief executive of Hume AI, a startup specializing in voice technology. “We’re seeing creators use it in all kinds of ways.”
AI can make podcasts sound better and cost less, industry insiders say, but the growing swarm of new competitors entering an already crowded market is disrupting the industry.
Some podcasters are pushing back, requesting restrictions. Others are already cloning their voices and handing over their podcasts to AI bots.
Popular podcast host Steven Bartlett has used an AI clone to launch a new kind of content aimed at the 13 million followers of his podcast “Diary of a CEO.” On YouTube, his clone narrates “100 CEOs With Steven Bartlett,” which adds AI-generated animation to Bartlett’s cloned voice to tell the life stories of entrepreneurs such as Steve Jobs and Richard Branson.
Erica Mandy, the Redondo Beach-based host of the daily news podcast called “The Newsworthy,” let an AI voice fill in for her earlier this year after she lost her voice from laryngitis and her backup host bailed out.
She fed her script into a text-to-speech model and selected a female AI voice from ElevenLabs to speak for her.
“I still recorded the show with my very hoarse voice, but then put the AI voice over that, telling the audience from the very beginning, I’m sick,” Mandy said.
Mandy had previously used ElevenLabs for its voice isolation feature, which uses AI to remove ambient noise from interviews.
Her chatbot host elicited mixed responses from listeners. Some asked if she was OK. One fan said she should never do it again. Most weren’t sure what to think.
“A lot of people were like, ‘That was weird,’” Mandy said.
In podcasting, many listeners feel strong bonds to hosts they listen to regularly. The slow encroachment of AI voices for one-off episodes, canned ad reads, sentence replacement in postproduction or translation into multiple languages has sparked anger as well as curiosity from both creators and consumers of the content.
Augmenting or replacing host reads with AI is perceived by many as a breach of trust and as trivializing the human connection listeners have with hosts, said Megan Lazovick, vice president of Edison Research, a podcast research company.
Jason Saldanha of PRX, a podcast network that represents human creators such as Ezra Klein, said the tsunami of AI podcasts won’t attract premium ad rates.
“Adding more podcasts in a tyranny of choice environment is not great,” he said. “I’m not interested in devaluing premium.”
Still, platforms such as YouTube and Spotify have introduced features for creators to clone their voice and translate their content into multiple languages to increase reach and revenue. A new generation of voice cloning companies, many with operations in California, offers better emotion, tone, pacing and overall voice quality.
Hume AI, which is based in New York but has a big research team in California, raised $50 million last year and has tens of thousands of creators using its software to generate audiobooks, podcasts, films, voice-overs for videos and dialogue generation in video games.
“We focus our platform on being able to edit content so that you can take in postproduction an existing podcast and regenerate a sentence in the same voice, with the same prosody or emotional intonation using instant cloning,” said company CEO Cowen.
Some are using the tech to carpet-bomb the market with content.
Los Angeles podcasting studio Inception Point AI has produced its 200,000 podcast episodes, accounting for 1% of all podcasts published on the internet, according to CEO Jeanine Wright.
The podcasts are so cheap to make that they can focus on tiny topics, like local weather, small sports teams, gardening and other niche subjects.
Instead of a studio searching for a specific “hit” podcast idea, it takes just $1 to produce an episode so that they can be profitable with just 25 people listening.
“That means most of the stuff that we make, we have really an unlimited amount of experimentation and creative freedom for what we want to do,” Wright said.
One of its popular synthetic hosts is Vivian Steele, an AI celebrity gossip columnist with a sassy voice and a sharp tongue. “I am indeed AI-powered — which means I’ve got receipts older than your grandmother’s jewelry box, and a memory sharper than a stiletto heel on marble. No forgetting, no forgiving, and definitely no filter,” the AI discloses itself at the start of the podcast.
“We’ve kind of molded her more towards what the audience wants,” said Katie Brown, chief content officer at Inception Point, who helps design the personalities of the AI podcasters.
Inception Point has built a roster of more than 100 AI personalities whose characteristics, voices and likenesses are crafted for podcast audiences. Its AI hosts include Clare Delish, a cooking guidance expert, and garden enthusiast Nigel Thistledown.
The technology also makes it easy to get podcasts up quickly. Inception has found some success with flash biographies posted promptly in connection to people in the news. It uses AI software to spot a trending personality and create two episodes, complete with promo art and a trailer.
When Charlie Kirk was shot, its AI immediately created two shows called “Charlie Kirk Death” and “Charlie Kirk Manhunt” as a part of the biography series.
“We were able to create all of that content, each with different angles, pulling from different news sources, and we were able to get that content up within an hour,” Wright said.
Speed is key when it comes to breaking news, so its AI podcasts reached the top of some charts.
“Our content was coming up, really dominating the list of what people were searching for,” she said.
Across Apple and Spotify, Inception Point podcasts have now garnered 400,000 subscribers.
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