Did Coinbase Contribute to Duke’s Stellar Year?

MPI suggested that 10 percent of the university’s returns could have come from the Coinbase investment.

(Michael Nagle/Bloomberg)

(Michael Nagle/Bloomberg)

Like many institutions, the Duke University Endowment has enjoyed a banner year — returning 56 percent and growing to $12.7 billion in assets under management.

A new report from Markov Processes International, which uses a proprietary, returns-based-style analysis, explored the possibility that an early investment in Coinbase helped drive those strong returns.

In March, crypto news site CoinDesk reported that Duke had invested in Coinbase, which is a secure platform that investors can use to buy and sell cryptocurrencies, back in 2015. The platform held its initial public offering in April to much fanfare, listing at roughly $328.28 per share. As of November 10, that valuation has ticked even higher.

“There was no question that this would pay out for the university — the only question was by how much,” according to the report.

MPI’s estimates show that the investment in Coinbase could have resulted in a 10 percent return for the university’s total portfolio in 2021. A spokesperson for the school declined to comment.


According to Michael Markov, co-founder and chief executive officer at MPI, that return would have made a huge difference for Duke in any year. But with the school returning 56 percent in 2021, Coinbase was clearly not the only driver of those returns. “It’s an unusual year [in which] all venture and private investments paid off,” Markov said. “It is a spectacular investment, obviously.”

To estimate the valuation of Coinbase prior to its public offering, MPI used Bitcoin’s prices as a proxy. “Bitcoin and Coinbase seem to be moving in lockstep — both directionally and in magnitude — posting daily correlations (30-day rolling) at around the 70 percent mark,” according to the report.

“Bitcoin is a nice proxy for Coinbase because they move together,” Markov said. “Its behavior is very different from most other investments. That’s why the system was able to decipher or distinguish it from any other investments.”

The MPI model estimated that Duke’s portfolio exposure to Coinbase is 2.32 percent, which translates into $200 million at the beginning of fiscal year 2021, when the endowment managed $8.5 billion. Markov’s model estimated that Coinbase’s return for fiscal year 2021 is 430 percent, placing the value of the investment in Duke’s portfolio at 10 percent for 2021.

“It’s just incredible that you can use so little data to see what the size was,” Markov said.

MPI’s research relies on William Sharpe’s economic theories, for which he won a Nobel Prize in 1990. The models Markov uses mimic portfolios and can reveal discrepancies between publicly reported and simulated portfolios. As Institutional Investor previously reported, the firm has also estimated portfolio holdings and allocations for endowments such Bowdoin, Harvard, and the University of Pennsylvania.