Podcast Summary: Capital Allocators – Top 5 of 2025: #3 Tim Sullivan

Episode Date: December 29, 2025
Guest: Tim Sullivan (Former Head of Private Markets, Yale Investments Office)
Host: Ted Seides

Overview

This episode features Tim Sullivan, one of the key architects behind the Yale Endowment’s legendary private equity and venture capital program. Retiring after nearly four decades with Yale, Tim sits down with Ted Seides to share lessons learned across market cycles, the evolution of institutional private investing, and the challenges that lie ahead for allocators. The conversation offers firsthand insight into the people, choices, and processes that created the "Yale Model," and how Tim thinks about the future of private markets.

Key Discussion Points and Insights

1. Origins and Evolution of Yale’s Investment Office

• Yale’s Early Days:

  • When Tim started in 1986, endowment management was hardly an industry—just 12 people, $1.75B AUM, “no air conditioning,” and only a handful of true investment professionals.
  • “There was no endowment management industry when I started. I just needed a job.” – Tim Sullivan [06:38]

• Dramatic Growth:

  • By Tim’s retirement, Yale’s office staffed over 50 investment professionals plus support, with assets exceeding $40B.

2. Yale’s Foray into Private Markets

• Inheritance and Expansion:

  • Yale had a head start, already investing in venture and buyouts since the 1970s, inheriting ties to firms like Sequoia, Kleiner Perkins, and Mayfield.
  • Tim and colleagues proactively knocked on doors, leveraging existing relationships to identify the best managers.
  • “Within five years, we were investors with virtually all of those firms, and most of them did fabulously well for us in the 90s.” – Tim Sullivan [07:47]

• Feedback Loops and Franchise Building:

  • The venture business is self-reinforcing: “Success begets success… the best venture firms attract the best entrepreneurs.” [09:33]
  • In buyouts, operational prowess was key; David Swensen’s insight was to back GPs with operating acumen, not just financial skills.

3. Measuring, Monitoring, and Evolving Allocator Best Practices

• Assessing Managers:

  • Early focus on understanding not just what managers promised, but how they operated—meeting operating talent, understanding roles, learning from mismatches between former Fortune 500 CEOs and smaller companies.
  • “One thing we learned pretty quickly was it’s not straightforward to bring in a guy who’d been a successful CEO... to an LBO situation.” [11:09]

• Organizational Changes:

  • Noted the shift from generalist firms to vertical specialization—industrial, tech, healthcare teams—raising new concerns about cohesion and culture.
  • “How do you bring up the talent from different verticals... How do they trust each other? That’s playing out in real time.” [14:18]

4. Key Market Cycles and Decision Moments

• 1987 Crash:

  • A defining moment for Swensen: rebalancing into equities when markets dropped, despite committee fears.
  • “If the minute we’re presented with a challenge like this, we’re going to ignore all the work we did, then why did we do it?” [17:33]

• Late ’80s Buyout Boom:

  • Yale steered clear of headline-making deals like RJR Nabisco, focusing on smaller, less competitive spaces.
  • “Suddenly leverage buyout... was a dirty word. It made it fertile ground for us.” [19:29]

• Dot-Com Bubble:

  • Valley funds made “absurd amounts of money,” but the team anticipated a bust. Yale stayed allocated, understanding the challenge of timing inflection points.
  • “Our winners, we sell for 20 times our money. And our losers, we sell for three times our money. And it was true.” [27:25]
  • “We could have pumped the brakes in 1995, and it would have been a huge mistake.” [29:00]

• 2008 Financial Crisis and Aftermath:

  • As firms grew in AUM and scope, Sullivan watched for “mission drift,” sometimes walking away when growth felt misaligned with core strengths.
  • “The two head guys were still making all of the decisions … this train is headed in a direction we’re not comfortable with, so we’re getting off.” [35:56]

5. Structural and Strategic Shifts in Private Markets

• Rising Multiples, Efficiency, and Crowding:

  • “For the 40 years of my career, the multiples in both public and private went up... in a period of declining interest rates.” [23:56]
  • Sullivan warns that past returns owe much to tailwinds unlikely to persist.

• Venture’s Changing Liquidity Dynamic:

  • Today, blockbuster firms and founders control outcomes, leading to longer private periods and more secondary sales for liquidity.
  • “The biggest problem is they’re [private companies] not really in the hands of the venture capitalists, they’re in the hands of the entrepreneurs.” [31:56]

• Manager Assessment and Diligence:

  • Only invest if you have a true competitive advantage in access; otherwise, “Is it going to be worth the brain damage, the illiquidity, the time?” [33:11]
  • “If you make a mistake, you’re stuck with it for 15 or 20 years.” [33:11]

6. Partnering and Culture: What Makes Allocators Successful

• Selecting and Sticking with Great Managers:

  • “Great partners, great stewards of our money in good times and bad. Keeping that bar really, really high was super important.” [62:13]

• Humility and Partnership:

  • Avoiding arrogance and “gotcha” moments with counterparties. “We always tried to have a sense for, we want them to be great partners for us, but we want to be great partners for them as well.” [62:13]

• Learning from Mistakes:

  • Lessons in sample size, the challenge of assessing emerging managers’ true skill vs. luck, and the realities of small sample bias.
  • “Maybe they did just flip heads five times in a row and look good.” [64:12]

Notable Quotes and Memorable Moments

“There was no endowment management industry when I started. I just needed a job.”
– Tim Sullivan [06:38]

“Success begets success... The best venture firms attract the best entrepreneurs. They had the best corporate relationships, they could hire the best partners... It’s a lottery ticket business.”
– Tim Sullivan [09:33]

“David said, look, we just went through this [asset allocation] exercise, spent a lot of time… If the minute we’re presented with a challenge like this, we’re going to ignore all the work… why did we do all of that work?”
– Tim Sullivan on Swensen’s leadership [17:33]

“If you're an institution that doesn't have those existing relationships or a good reason why you think you can access those firms, you really have to ask yourself some serious questions...”
– Tim Sullivan [33:11]

“It’s going to be very difficult for private equity, broadly defined, to be the single defining alpha creating strategy for institutional investors the way that it’s been over the last 35, 40 years.”
– Tim Sullivan [52:50]

“One problem a lot of institutions fall into is thinking, ‘I’m just as smart as these guys. Why are they so much richer?’... We always tried to have a sense for—be supportive, but also demanding in a way that everyone can feel good about.”
– Tim Sullivan [62:13]

Important Timestamps and Segments

• 06:38 – Early days at Yale; no “endowment management industry”
• 07:47 – Inheriting and building relationships in private markets
• 09:33 – The power of feedback loops in venture capital
• 14:18 – Challenges of verticalization and firm culture
• 17:33 – Swensen’s pivotal moment during the 1987 crash
• 19:29 – Yale's intentional avoidance of the largest buyout deals
• 27:25 – Dot-com bubble; unparalleled returns and stress in Silicon Valley
• 31:56 – Shift of power to founders in late-stage venture and challenges for liquidity
• 33:11 – Realism about access and returns in today’s venture markets
• 35:56 – Thoughts on manager growth and saying 'no' to misaligned expansion
• 40:42 – The “swimming naked” moment post-2008 and real-life partnership tests
• 52:50 – Pressures facing today’s private equity (liquidity bottleneck and dealflow)
• 62:13 – Sullivan’s maxim: partnership, humility, and sticking to what you’re good at

Final Reflections and Closing Remarks

Tim closes discussing why he never left Yale (“I never wanted to be a CIO... I was very lucky to wind up by accident in this world”), his plans to stay engaged through advisory work, and the uncertainty—but excitement—of what comes next. He highlights the importance of experimentation and keeping an eye out for exceptional people, regardless of category or asset class.

He also shares personal anecdotes: his love of travel and craft breweries (616 visited since 2000!), the impact of his father and David Swensen, and his approach to work-life balance—offering a model not only for allocators but for anyone navigating a career built on relationships, adaptability, and integrity.

For a masterclass in long-term allocator thinking and a humanizing perspective on the legendary “Yale Model,” this episode delivers both wisdom and candor.