You have to consider a few things:
1) one may be interested in the opportunity of above-average returns. If the average vanguard return is 7%, and the average self-managed return is 6.9%, on average of course vanguard is in your best interest. But what if you think you can do better? Harvard's ran a 12% return for 20 years, for example. Should they forgo it because the average is a more guaranteed, safe, and on average, better bet? Probably not. Does it signal to weaker funds to simply go with the Vanguard option? Yes.
e.g. check out this report: http://www.hmc.harvard.edu/docs/Final_Annual_Report_2015.pdf
2) looking at just returns is myopic. You need to look at risk-adjusted returns, for which finance has proposed a whole bunch of measures. I would not be surprised if the endowment funds were less risky than the vanguard, although it's hard to tell. And guess which years generate brilliant performance for risky portfolios that are heavy on stocks? Post-crisis years where the market rebounds. Risk isn't the only thing, there are all kinds of objective funds can set. Most colleges for example set liquidity limits that would be unworkable for traditional hedge funds that invest in high-potential returns in illiquid assets. Limiting yourself like this changes your roi.
That having been said, there's obviously a lot of value in this simple perspective. And it completely confirms a new reality: outperformance is getting harder and harder and investors are less likely to beat the market and add value with their investing know-how. It's pretty recent that this has been happening to this extent.