Universities Are Becoming Billion-Dollar Hedge Funds with Schools Attached • Hacker News Board

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

#141

Post by plandis » Tue, Mar 22, 2016, 3:34 AM UTC

jqgatsby wrote: post #82

jonknee wrote: post #70

Earlier quoted context omitted.

> 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…

I walked out of MIT with $100K in student loans, because I had the combination of 'parents who make too much money' and 'parents who had five kids and did not adequately save for their children's education'. I'm all for soaking the rich, but how is that fair? I was apparently rich by association, and it was pretty upsetting to see kids who were ostensibly poorer than I was get a substantially easier start in life.

I suppose it's a question of utility. If universities truly (I doubt this is really true) cannot afford to pay everybody's tuition then how do you prioritize need? One could argue that as someone from a wealthy family that you have a decent safety net if you fail even with large student loans. You probably have a place to stay at your parents home if you really needed it. Contrast that to someone who might be poor and have the same loans as you do but perhaps they don't have their parents' illiquid assets to fall back on.

This happened to me around my senior year of college. It's a scary thought that once you're done with college you need to get a job or be homeless. It lead to a lot of stress in the fall semester of my senior year while I was job hunting. It also stands to reason that if you're from a wealthy family then you had access to a good education. I can't understate how unprepared I was for college being from a poor school district even through I was in the honor classes! Poor students play a lot of catch-up in college early on. This is really hard to do when you're also trying to work 20 hours a week to afford food.

I'm not saying it's fair that you have so much debt but if it's zero-sum for financial aid I can understand why you were not given any over poor students whose parents are equally not able to pay. You're not thinking about the external factors that statistically probably put you ahead over a lot of poor students. Unfortunately that is life all we can really do is make sure our kids don't have the same problems!

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

#142

Post by dangrossman » Tue, Mar 22, 2016, 3:41 AM UTC

Grishnakh wrote: post #140

koolba wrote: post #131

Earlier quoted context omitted.

> Anyway, they can't do that, since the ACA has mandated that insurers spend at least 80 or 85% of premiums on health care costs since 2012. That part of the law is particularly terrible. It directly incentivizes keeping costs high as the profit of the insurer is a fixed (says max but that means exactly 15%) percentage of the gross. It's in their interests to have the price of everything go up!

The whole law is terrible and it should be repealed and replaced with a nationalized system. As long as you have the insurance companies acting as middlemen, it's in their best interest to deny care as much as possible, to increase their profit. What actual good do they do? None, they just come between the patient and the caregiver.

> it's in their best interest to deny care as much as possible, to increase their profit

That's not the case, as the comment you replied to points out.

Let's say an insurer collects $1B in premiums some year. The ACA mandates that at least 85% of that is spent on healthcare costs. At most, the company gets to keep $150M, or 15% of the premiums. For every claim denied bringing the payouts below $850M, the number they keep 15% of goes down, so their profits go down. Denying claims costs them money, rather than letting them keep more.

If the insurer wants to make more than $150M the next year, there is only one way to do that: pay more than $850M in healthcare costs this time, and increase premiums by the same amount. That means encouraging and approving more claims, not fewer.

Unfortunately, this aspect of the MLR promotes, rather than punishes, increased healthcare costs as a byproduct. Competition is supposed to be the check on that -- if an insurer doesn't control costs so that it can raise premiums and keep 15% of a bigger number, you'll switch to a plan with another insurer that isn't doing that and offers lower premiums. Unfortunately, that's not doing the job very well for a variety of reasons.

> What actual good do they do? None, they just come between the patient and the caregiver.

Insurance protects the insured from catastrophic losses by pooling risk. When the caregiver wants to bill me several hundred thousand dollars in unavoidable expenses, I very much appreciate having a middleman I only pay $200 per month to instead.

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

#143

Post by djcapelis » Tue, Mar 22, 2016, 3:45 AM UTC

santaclaus wrote: post #135

Pyxl101 wrote: post #85

Earlier quoted context omitted.

> [Yale] can't spend 2%(540/26,000) of their endowment per year on free tuition? What is this money for? The purpose of research universities is to engage in scientific research, not to educate people . Education is one of their activities but not their primary goal. For more about this, read "The Purpose of Harvard is Not to Educate People" [1]: > But there is one misimpression that people seem to have[]: the purpos…

> The purpose of research universities is to engage in scientific research, not to educate people. Shouldn't Yale be kicking everyone's butt here, then? Yale engineering ranks a paltry number 38, with quite a few publics far ahead of it.

Yes. Funny, that.

Turns out money can't buy everything. Especially when directed at the things that don't matter.

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

#144

Post by desdiv » Tue, Mar 22, 2016, 3:53 AM UTC

machinshin_ wrote: post #106

SilasX wrote: post #66

Earlier quoted context omitted.

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.

When you have 40 BILLION to invest, you can't just dump it into an index fund.

Why not? Vanguard is managing $3 trillion just fine; an additional paltry $40 billion isn't going to tip the boat.

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

#145

Post by bachmeier » Tue, Mar 22, 2016, 3:57 AM UTC

Pyxl101 wrote: post #85

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…

> [Yale] can't spend 2%(540/26,000) of their endowment per year on free tuition? What is this money for? The purpose of research universities is to engage in scientific research, not to educate people . Education is one of their activities but not their primary goal. For more about this, read "The Purpose of Harvard is Not to Educate People" [1]: > But there is one misimpression that people seem to have[]: the purpos…

> The purpose of research universities is to engage in scientific research, not to educate people.

I take issue with a couple things in that sentence. That is the goal of a small number of private research universities. I don't know of any public research universities, even the highest ranking, that don't dedicate significant resources to undergraduate education.

The second thing is that the mission of Harvard et al is primarily scholarship (in any field) and graduate education, not just scientific research.

These are minor points relative to your comment but I don't want the public to believe all research universities exist to do only scientific research.

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

#146

Post by JackFr » Tue, Mar 22, 2016, 4:05 AM UTC

Pyxl101 wrote: post #85

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…

> [Yale] can't spend 2%(540/26,000) of their endowment per year on free tuition? What is this money for? The purpose of research universities is to engage in scientific research, not to educate people . Education is one of their activities but not their primary goal. For more about this, read "The Purpose of Harvard is Not to Educate People" [1]: > But there is one misimpression that people seem to have[]: the purpos…

> The purpose of research universities is to engage in scientific research, not to educate people. Education is one of their activities but not their primary goal. For more about this, read "The Purpose of Harvard is Not to Educate People"

Actually, no. Despite what some physicist may have written in an op-ed in Discover magazine, The Charter of the President and Fellows of Harvard College says something quite different:

"Whereas, through the good hand of God, many well devoted persons have been, and daily are moved, and stirred up, to give and bestow, sundry gifts, legacies, lands, and revenues for the advancement of all good literature, arts, and sciences in Harvard College, in Cambridge in the County of Middlesex, and to the maintenance of the President and Fellows, and for all accommodations of buildings, and all other necessary provisions, that may conduce to the education of the English and Indian youth of this country, in knowledge and godliness: It is therefore ordered, and enacted by this Court, and the authority thereof, that for the furthering of so good a work and for the purposes aforesaid, from henceforth that the said College, in Cambridge in Middlesex, in New England, shall be a Corporation, consisting of seven persons, to wit, a President, five Fellows, and a Treasurer or Bursar. . . "

Also worth noting from the text, was that over 350 years ago, it was the growing endowment which led to the incorporation. . .

http://library.harvard.edu/university-archives/using-the-col...

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

#147

Post by chrisabrams » Tue, Mar 22, 2016, 4:11 AM UTC

inthewoods wrote: post #126

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…

Even worse, in my opinion, is that these institutions can continue to be considered Not for Profit organizations. Harvard is very interesting in this way - they have so much money in their endowment that they seek all kinds of investment. Real estate is one of their favorites. When they buy property, it can no longer be taxed. This is why the towns surround Cambridge hate when Harvard buys up property. Watertown, in…

Am I reading this correctly? A non-profit can buy real estate property and not pay taxes on the property? Is this investment property, or property being used for university usage?

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

#148

Post by sirkneeland » Tue, Mar 22, 2016, 4:13 AM UTC

huac wrote: post #73

A bit tangential, but don't donate to Ivy Leagues. I get that you might feel a sense of pride in having graduated from the school, but with a 11 digit endowment, you can rest assured that the school will be there for future students in perpetuity. Rather, give to state schools or community colleges or really, any other school. Help them serve students of all economic backgrounds, not just the elite. The most importan…

There is a (very slight) incentive for an Ivy Leaguer to donate to his/her school: the accursed rankings often factor the % of alumni who donate into their ranking formula. I donate an insignificant amount to my alma mater for this reason.

Then there's the potentially bigger incentive for an Ivy Leaguer to donate: to help their kids get in.

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

#149

Post by adminprof » Tue, Mar 22, 2016, 4:16 AM UTC

timrpeterson wrote: post #96

Pyxl101 wrote: post #92

The article title "...with Schools Attached" misses an important fact about most universities. The purpose of most universities is to engage in scientific research. They are not schools, not primarily. They are chiefly research institutions that, yes, have schools attached. For more about this, read: http://blogs.discovermagazine.com/cosmicvariance/2008/05/29/... > [T]here is one misimpression that people seem to hav…

Except, they treat their researchers like total crap. Taking 2/3 of all grant money for overhead? Salaries for 45 year olds with 20 years of experience that are the same or worse as 25 year old with zero experience in private sector. Publish or perish? This whole thing you say these schools focus on, research? Pathetic. And trust me I know I've been at all the top schools and am now a professor.

It's strange to me that you're a professor but the things you're saying aren't true. The 2/3 grant money thing I think you are talking about indirect costs? That's not money off the top of received grants, it's computed like a tip, where when you receive $1 of grant funding, the university receives $0.66. And only on non-equipment, non-tuition (for funding students) items. So it usually works out to being about 35%.

And Ivy League universities pay their faculty quite well, especially in computer science. I don't know of any cases where a entry-level software engineer is paid even close to what a full computer science professor makes on even their 9-month salary.

This makes me ask, have you really "been at all the top schools and am now a professor"? I feel like any assistant professor would know these things.

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

#150

Post by akhilcacharya » Tue, Mar 22, 2016, 4:26 AM UTC

djcapelis wrote: post #143

santaclaus wrote: post #135

Earlier quoted context omitted.

> The purpose of research universities is to engage in scientific research, not to educate people. Shouldn't Yale be kicking everyone's butt here, then? Yale engineering ranks a paltry number 38, with quite a few publics far ahead of it.

Yes. Funny, that. Turns out money can't buy everything. Especially when directed at the things that don't matter.

In the case of Yale, it does buy prestige.