University Diaries has long
chronicled the efforts of dozens of
thoughtful people who feel called
to do something about this:


All sorts of people have stepped up
with good ideas about how to stop
one school from hoarding billions
and billions of dollars. Hoarding
them. Not using many of them, for
educational or charitable or whatever
uses. Just sitting on them. Or handing
out huge gobs of them to their
fund managers.

How did the money grow so fast and
get so big? A combination of
tax benefits – “Harvard’s income
from capital gains, interest, and
dividends is all tax free,
and the donations it receives
are tax deductible.”

and the inexhaustible ego of
hedgies who can’t think of anything
better to do with hundreds of millions
of charitable dollars than throw
them at one of the world’s richest
institutions. That way, they get
their name associated with Harvard.

All sorts of proposals have come
forward, most having to do
with messing up those exemptions,
although a few appeal directly to
Harvard alumni to divert their
contributions to actually worthy causes.

About ten years ago, when people realized
that this non-profit was paying several
of its money managers 35 million a
there was an upsurge in outrage
and in proposals for change.
You can type harvard endowment into
UD‘s search engine if you want to track
years and years of reform proposals from
many different people.

As my post’s headline suggests,
none of this reformist activity
has had the slightest effect.
Harvard keeps hoarding what it
has and supplementing it with
hedgie vanity thingies.


If you’re aware of this history,
you tend to respond to the like-clockwork,
beginning of the academic year,
New York Times op-ed about this
with a certain wryness. You begin to
recognize the ritual by which
Harvard acknowledges the fact of
complaint and bats it down with
the familiar bullshit (Everyone needs
a rainy day fund!)
and then the
whole thing goes away for another year.

But anyway. (Deep mournful breath.)
Here’s the latest gesture, this one from
a professor who’s a tax attorney.

“We’ve lost sight of the idea that
students, not fund managers, should
be the primary beneficiaries of a
university’s endowment. The private-equity
folks get cash; students take out loans.”

So (world-weary sigh) here’s the latest
go-nowhere proposal:

“Congress should require universities with
endowments in excess of $100 million to spend
at least 8 percent of the endowment each year.
Universities could avoid this rule by shrinking
assets to $99 million, but only by spending the
endowment on educational purposes, which is
exactly the goal.”

Yes, yes, hear, hear, good fellow.
Jolly good fellow.



Some good snark from Malcolm Gladwell.

Yale’s endowment spent $480 million paying its hedge fund managers last year and $170 million on its students.


I was going to donate money to Yale. But maybe it makes more sense to mail a check directly to the hedge fund of my choice.


Why doesn’t Yale spin off its university division and concentrate on its core money management business?


It came down to helping the poor or giving the world’s richest university $400 mil it doesn’t need. Wise choice John!

[John Paulson Gives $400 Million to Harvard for Engineering School

The gift from Mr. Paulson, a billionaire hedge fund manager, is the largest in the university’s history.]


If billionaires don’t step up, Harvard will soon be down to its last $30 billion.

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4 Responses to “Many are called. None are chosen.”

  1. Bill R Says:

    There’s another fact in that story that is interesting.

    “Last year, Yale paid about $480 million to private equity fund managers as compensation — about $137 million in annual management fees, and another $343 million in performance fees, also known as carried interest — to manage about $8 billion, one-third of Yale’s endowment”

    Doing the math, they are paying 6% of their endowment as management fees. That implies double digit returns on the investments.

    If that’s not true, why are they paying the fees?

    If it is true, how?

    My grandmother earns about 1% return on her savings. If there is a way that large concentrations of capital can reliably achieve 12% returns, we might look into how and why this is possible.

  2. Jack/OH Says:

    Bill R: I’ve also heard of double digit returns for very high rollers at the idle talk/anecdotal level. Can’t cite an example, though. Don’t know what to make of it.

  3. Bill R Says:

    And this just in. From the New York Times.

    “Despite the success of its endowment, in 2014 Yale charged its students $291 million, net of scholarships, for tuition, room and board.”—Victor Fleischer, New York Times, Aug. 19

    So Yale is paying her fund managers almost twice what Yale is collecting from her students.

    Well, as it says in the Bible, “Though shalt not muzzle the ox that treadeth out the corn”, but something still seems wrong.

    Jack/OH: I don’t know what to make of it either.

  4. University Diaries » You know what would be really cool? Says:

    […] be… What an amazing icon of the postmodern university… Unimaginably rich, it would hoard/eat its cash, so that little to no money would be put to academic […]

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