The Smart Money's Secret: How to Profit from Harvard and Yale's Private Equity Fire Sale

The Harvard and Yale endowments—long the gold standard of institutional investing—are selling chunks of their private equity portfolios. But don't mistake this for a retreat from risk. These are calculated moves, and here's why individual investors should sit up and take notice.

The Sell-Off Isn't a Panic—It's a Playbook

Both endowments have been transparent: they're rebalancing, not retreating. Regulatory pressures, like debates over tax exemptions, and the “denominator effect” (where falling public markets inflate the relative size of private assets) forced them to trim holdings. But the real story? They're using secondary markets to swap out older, less liquid stakes for newer opportunities.

This isn't a crisis—it's a $162 billion opportunity. Secondary sales allow investors to buy into funds at discounts (now averaging 6% below net asset value) while institutions stay committed to private equity's long-term returns.

The Numbers Don't Lie: Why Secondary Markets Win

The data is unequivocal. Secondary investments have outperformed both primary private equity and public equities over rolling 10-year periods. Bain & Company's 2024 report shows median returns for secondary funds beat private equity, real estate, and venture capital. Even better: 95% of secondary funds from 2000–2019 never lost money by Q2 2023.

Here's why:
1. Reverse J-Curves: You skip the initial cash-burn phase of new funds.
2. Shorter Durations: Older funds are closer to exits.
3. Discounted NAVs: Buying at a 6% discount to net asset value is like getting a 6% head start.

Where to Deploy: Tech and Infrastructure Are the Playgrounds

The sectors Harvard and Yale are unloading? Focus on tech and infrastructure—both poised for explosive growth.

• Tech: Secondary stakes in later-stage startups offer access to AI, biotech, and green tech without the volatility of public markets.
• Infrastructure: With global spending on renewable energy and smart cities surging, these assets are “cash machines” with 10+ year contracts.

How to Play This: Step-by-Step

1. Go Through Secondary Funds: Avoid direct deals. Funds like Blackstone's GSO or Coller Capital have the expertise to underwrite deals and navigate J-curves.
2. Target Funds of Funds: For diversification, consider vehicles like the StepStone Global Secondary Opportunities Fund.
3. Check the Vintage: Opt for funds from 2018–2020. Their assets are mature enough for exits but young enough to avoid peak J-curve pain.

Risks? Yes. But the Reward Is Worth It

Illiquidity is the elephant in the room. These are long-term bets—think 5+ years. And while the data is strong, no investment is foolproof. Do your homework:
- Ask for track records: How did the secondary fund perform in 2008 or 2020?
- Avoid fund-of-funds with layered fees: Double-digit management fees? Run.

The Bottom Line: This Is Your Endowment Moment

Harvard and Yale aren't abandoning private equity—they're fine-tuning their bets. And that means you can too. With discounts widening and institutions leaning into secondaries, now's the time to tap into the same strategies that built the endowment model.

Don't wait for the next J-curve to turn. Act now—before the smart money gets too smart.

Jim Cramer's signature style: bold, data-driven, and unafraid to call a spade a spade. Always remember—the market rewards those who buy when others are fearful.