MinnPost.com discusses a recent study of American universities which concludes, among other things, that
Universities [don’t] tap their endowments for more cash in tough times, even though their rules [allow] bigger withdrawals.
“One reason to have an endowment is to smooth over the shocks,” [one of the authors] said. “It’s a rainy-day fund so that when things go bad, they can dip into those reserves. What we found is they deviate from their own policy.”
Among the reasons for this behavior: Endowment managers who are more concerned about the “prestige” of building the endowment’s value and “implicit contracts” with donors to maintain the size of the endowment.
“What our paper shows is that universities are behaving in a way to grow the endowment rather than using it to support the activities of the university,” [he] said. “The point is that if you think endowments exist to smooth over the shocks in bad times, they’re not doing that. … They’re maintaining the value of the endowment for its own sake.”
UD wrote about endowment hoarding here. She featured this Peter Conti-Brown paper and wrote:
UD is particularly intrigued by Conti-Brown’s suggestion that the awesome, anally hoarded university endowment [of some universities] has finally transmogrified and hardened into a physical object, like a fantastic yacht, or Ezra Merkin’s Rothko room….
April 29th, 2010 at 3:16PM
Remember when there was a concern about the size of Harvard’s endowment?
Right before they lost a lot of it…
If they had been using that money instead of hoarding it… well, gee, golly!
April 29th, 2010 at 3:45PM
Yes, Cassandra. I followed that incredible story on the blog. Harvard at various points was in a position to spends tens of millions of dollars on whatever educational or social initiatives it liked. It didn’t spend that money. And then it lost it.
April 30th, 2010 at 7:28AM
Hardened into a physical object. Indeed.
“Mine is bigger than yours!” screamed Harvard to Yale.