Harvard and Yale take the lead, U.S. university endowment funds rush to exit private equity funds

U.S. universities flee private equity, a dramatic "run for the exits" by investors triggered by liquidity pressures and Trump policies is unfolding. On May 7, Bloomberg reported that, according to informed sources, Princeton University's endowment fund has been exploring the feasibility of potentially selling private equity stakes in recent weeks. Due to slow returns over the years and infrequent capital distributions, Texas Tech University's endowment fund, which exceeds $2 billion, is facing challenges. Christopher White, who is responsible for private equity investments at Texas Tech, stated that the university plans to reduce some of its private equity exposure. As previously mentioned by Wall Street Journal, Harvard University has allocated nearly 40% of its $53 billion endowment to private equity and is currently in deep negotiations to sell about $1 billion in private fund stakes. Additionally, Yale University, which was among the first to shift from common stocks and bonds to more illiquid assets, is also exploring selling private equity in the secondary market. The transaction size could reportedly reach $6 billion. Gaurav Patankar, Chief Investment Officer at Highland Consulting, which manages endowments and foundations, stated: "It's a bit like planning an escape from an unlikely fire in a movie theater; everyone wants to be the first to get out." Liquidity Pressure + Trump Policies = Investor "Run for the Exits" Bloomberg reported that as private equity firms take longer than ever to return funds to investors, the delays in investment returns have created liquidity pressures for institutions such as endowments, pensions, and family offices. U.S. university endowments, the most reliable clients of private equity firms, can no longer wait. According to Bain & Company data, as of the end of 2024, the private equity industry holds approximately $3.6 trillion in unrealized value across 29,000 unsold portfolio companies. Last year, the proportion of funds allocated to investors relative to net asset value fell to a record low of 11%, while the long-term average is around 25%. U.S. universities have flocked into venture capital and private equity over the past decade, only to find themselves overly exposed to hard-to-value assets. This has disrupted the structural balance of their endowment funds, which are the source of funding for building libraries, providing financial aid, and paying professor salaries. Gaurav Patankar pointed out that many universities today rely more on endowment funds to meet operational budgets, putting endowment boards and committees on "high alert." Worse still, Trump's promise to cut federal funding and grants to universities like Harvard and Princeton has further intensified the pressure. In April, the Trump administration announced it would suspend over $2 billion in grants to Harvard and is reviewing additional funding. Federal funds have also been frozen for Columbia University, Princeton University, Northwestern University, and Cornell University This situation is prompting U.S. university endowment fund managers to consider options that were once seen as a last resort: selling private equity stakes to raise cash. However, reports indicate that institutions seeking to sell equity in the secondary market may find a large number of potential buyers, but some investors are concerned that selling positions in an uncertain market could lead to greater losses. Billionaire Bill Ackman criticized Harvard's allocation to relatively illiquid investments on Tuesday, stating that the university is in a financial crisis. The founder of Pershing Square Capital Management and Harvard alumnus believes that the institution can only sell private equity stakes at a "significant discount." However, Texas Tech University has currently ruled out the possibility of selling the entire fund stake, as White stated, because volatility has led to bids dropping to unacceptable levels. The school is weighing more unusual options, such as selling preferred shares through special purpose entities to alleviate the pain