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Universities Are Becoming Billion-Dollar Hedge Funds with Schools Attached

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Re: Universities Are Becoming Billion-Dollar Hedge Funds with Schools Attached

#61

Post by vzcx »

KKKKkkkk1 wrote: post #32

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…

> Money management is not what the universities are good at, and it's not what they are for.

Isn't that precisely why they pay other people to manage it?

> It's as if the purpose for which they were created has become an afterthought.

I sometimes wonder what that purpose is. What do you think?

Re: Universities Are Becoming Billion-Dollar Hedge Funds with Schools Attached

#62

Post by beeboop »

SilasX wrote: post #53
hkmurakami wrote: post #49

Earlier quoted context omitted.

Any discussions of returns must necessarily consider the risk incurred to achieve that return.

Sure, but (by most metrics) hedge funds are going to be riskier/more volatile and you have to lock up your money for longer. So the same return would count as worse performance if placed in hedge fund (and that's not even accounting for differences in expenses yet).

Hedge funds as a group are only risky and volatile compared to mutual funds. Their degree of riskiness varies tremendously, and there are a great number of them that would offering investment management that is tremendously less risky than an index fund.

Re: Universities Are Becoming Billion-Dollar Hedge Funds with Schools Attached

#63

Post by epalmer »

The University of Richmond has the Spider Management Company managing it and other smaller endowments. Richmond has done well with its endowment. http://smc.richmond.edu/

As of 2015 its endowment was valued at $2.37 Billion. That with ~4,100 Full Time Equivalent (FTE) students.

Re: Universities Are Becoming Billion-Dollar Hedge Funds with Schools Attached

#64

Post by [deleted] »

rayiner wrote: post #42

> Yale’s comparatively modest $26 billion endowment, for example, made hedge fund managers $480 million in 2014, while only $170 million was spent on things like tuition assistance and fellowships for students. For context, Yale's endowment produced an investment gain of $4 billion that year. Seems like the $480 million was money well spent.

[deleted]

Re: Universities Are Becoming Billion-Dollar Hedge Funds with Schools Attached

#65

Post by spriggan3 »

hiddencost wrote: post #22
lr4444lr wrote: post #12

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.

> His critical theory is much more important than his practice.

People should also do what they preach. And acknowledge their own bias and hypocrisy which Chomsky never does. He does like you, dismisses any criticism as "irrelevant" and that's why nobody can debate with Chomsky, there is no discussion.

Re: Universities Are Becoming Billion-Dollar Hedge Funds with Schools Attached

#66

Post by SilasX »

beeboop wrote: post #54
SilasX wrote: post #51

Earlier quoted context omitted.

Is that investment gain net of the fund manager payment? Because an S&P 500 index fund would have returned 13.5% that year[1], or ~$3.5 billion, about the same as $4 billion minus the half-billion hedge fund managers costs. And presumably they had to pay other investment managers (for non-hedge investments), and the money in HFs is significantly less liquid and accessible and more volatile. [1] http://performance.mor…

This is ignoring a lot that goes into investment management. It's easy to say S&P would have done just as well on that particular year, but what about every other year? What about years with big losses? Additionally, investment managers do things like create portfolios for you that match your risk tolerance or other special needs/requirements. Overall, it's true that managed investments don't do as well as index fund…

Being able to find where you are on the risk/return and growth/income spectrums is not hard enough to merit the hundreds of millions of dollars in fees.

For whatever strategy you want, find the corresponding index fund with that strategy, and it will probably have done better after expenses and will have more liquidity and less volatility.

Re: Universities Are Becoming Billion-Dollar Hedge Funds with Schools Attached

#67

Post by spriggan3 »

ArkyBeagle wrote: post #44
lr4444lr wrote: post #12

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.

We're all hypocrites. Reality is stubborn in that way.

But some refuse to acknowledge their bias and their hypocrisy. That's the issue here.

Re: Universities Are Becoming Billion-Dollar Hedge Funds with Schools Attached

#68

Post by andr3w321 »

I don't really care if universities hire hedge managers to manage their endowment, but it's absurd that schools with multibillion dollar endowments still charge tuition. Yale has ~12,000 students and a $26 billion endowment. Tuition is ~$45,000 per student. $45,000 * 12,000 = $540 million. They can't spend 2%(540/26,000) of their endowment per year on free tuition? What is this money for?

Of course this ignores financial aid so Yale's operating costs are much less than $500 mil/year. If you're going to donate to a university your money will go much further at a small college that actually needs your money and will actually spend it rather than hoarding it. TMQ had some great articles about this topic back in the day. http://espn.go.com/nfl/story/_/page/TMQWeekFour140930/robert... Halfway down.

Re: Universities Are Becoming Billion-Dollar Hedge Funds with Schools Attached

#69

Post by sseveran »

SilasX wrote: post #66
beeboop wrote: post #54

Earlier quoted context omitted.

This is ignoring a lot that goes into investment management. It's easy to say S&P would have done just as well on that particular year, but what about every other year? What about years with big losses? Additionally, investment managers do things like create portfolios for you that match your risk tolerance or other special needs/requirements. Overall, it's true that managed investments don't do as well as index fund…

Being able to find where you are on the risk/return and growth/income spectrums is not hard enough to merit the hundreds of millions of dollars in fees. For whatever strategy you want, find the corresponding index fund with that strategy, and it will probably have done better after expenses and will have more liquidity and less volatility.

There is not always one with the capacity for that kind capital.

Re: Universities Are Becoming Billion-Dollar Hedge Funds with Schools Attached

#70

Post by jonknee »

andr3w321 wrote: post #68

I don't really care if universities hire hedge managers to manage their endowment, but it's absurd that schools with multibillion dollar endowments still charge tuition. Yale has ~12,000 students and a $26 billion endowment. Tuition is ~$45,000 per student. $45,000 * 12,000 = $540 million. They can't spend 2%(540/26,000) of their endowment per year on free tuition? What is this money for? Of course this ignores finan…

> I don't really care if universities hire hedge managers to manage their endowment, but it's absurd that schools with multibillion dollar endowments still charge tuition. Yale has ~12,000 students and a $26 billion endowment. Tuition is ~$45,000 per student. $45,000 * 12,000 = $540 million. They can't spend 2%(540/26,000) of their endowment per year on free tuition? What is this money for?

It's mainly a tax on rich people. Students from lower income households don't pay that tuition.

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