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The issue is not so much that schools invest in hedge funds (the endowment managers are just trying to maximize returns), but that the endowments pay out such a small percentage of their funds each year to support research, financial aid, and everything else. Harvard pays out only 4-6% of the endowment yearly. On their huge endowment, if they increased the payout by .5%, they would have a whole lot more to spend on w…
Earlier quoted context omitted.
> "the endowment managers are just trying to maximize returns" respectfully, the article paints a much darker and more insidious picture than that.
It seems to paint the picture that they're trying maximize the money they (the managers) make, not necessarily the returns.
Earlier quoted context omitted.
This is incredibly shortsighted. The point of an endowment is not to pay it off, the point is that the endowment persists indefinitely, and the interest / returns fund operations. If people wanted to contribute directly to a university, they can. Instead they're contributing to the endowment. Respect that choice. It's pathetic that universities have actually set up a sustainable source for funding scholarships etc in…
What if university endowments were used to fund research and implementation into ways to drive down the cost of education to zero?
Back in the day, Harvard didn't outsource to hedge funds but instead had the portfolio managers in-house. These folks were paid a small fraction of what they would make in the private hedge fund industry, but my understanding is that the Harvard community was up in arms at what they were making - so they quit/got pushed out and then Harvard started outsourcing to hedge funds. The result was worse performance and higher fees.
Of course, it's not all roses - Larry Summers famously made a terrible bet on interest rates that Harvard had to unwind at a large loss.
Earlier quoted context omitted.
>"Divestment is likely to have negligible financial impact on the affected companies. And such a strategy would diminish the influence or voice we might have with this industry." http://www.harvard.edu/president/news/2013/fossil-fuel-dives...
"The evidence from South Africa suggests that divestment, while ineffective in a financial sense, can have an impact by shaping public discourse. If universities across the country divested from fossil fuels, this would again be the case." http://www.iop.harvard.edu/does-divestment-work
So practically speaking, no.
The issue is not so much that schools invest in hedge funds (the endowment managers are just trying to maximize returns), but that the endowments pay out such a small percentage of their funds each year to support research, financial aid, and everything else. Harvard pays out only 4-6% of the endowment yearly. On their huge endowment, if they increased the payout by .5%, they would have a whole lot more to spend on w…
This is incredibly shortsighted. The point of an endowment is not to pay it off, the point is that the endowment persists indefinitely, and the interest / returns fund operations. If people wanted to contribute directly to a university, they can. Instead they're contributing to the endowment. Respect that choice. It's pathetic that universities have actually set up a sustainable source for funding scholarships etc in…
You are talking about endowments? Ha.
I don't know how much this matters. Harvard has the richest endowment but still has less money then nine individuals. I am just waiting for say the Carlyle Group to go public like KKR or Blackstone to make HH funds boring and mainstream.
"In 2012, Carlyle completed a $700 million initial public offering and began trading on the NASDAQ stock exchange on May 3, 2012."
Sidenote, and I may get down-voted heavily for saying this, because he's got plenty of "cred" on so many different fronts, but Noam Chomsky always struck me as a hypocrite when it came to his economic and political thinking for taking a pension supported by the $13 billion MIT endowment, which is surely generating money through many of the practices disparaged both in this article and Chomsky's own beliefs.
Hypocrisy is such a boring & irrelevant criticism in most contexts. His critical theory is much more important than his practice. He has to survive in the world that exists, not the one he wishes existed. There's really minimal value in such a symbolic gesture as rejecting a pension, and criticizing his ideas on such irrelevant grounds takes away from actually talking about the issues raised.
The problem is that an Ivy League school is paying the expenses of managing investments worth a gazillion dollars instead of focusing on research and education. Money management is not what the universities are good at, and it's not what they are for. But in fact, the "hedge fund problem" is not the only problem American universities have - they are also running sports teams, housing, construction and real estate ope…