Key Takeaways
- • Harvard, with a $38 billion endowment, has over 15 percent of its endowment invested in hedge funds, according to a WSJ-cited framing and the supplemental commentary (March 2016 reporting).
- • Yale's $26 billion endowment paid hedge fund managers $480 million in 2014, versus $170 million spent on tuition assistance and fellowships.
- • Experts estimate more than $100 billion of US educational endowment money is invested in hedge funds, costing roughly $2.5 billion in fees in 2015.
- • Critics cite conflicts of interest on endowment boards, including Dartmouth trustees who managed investments for the school while serving as trustees.
- • The available sources are commentary and advocacy pieces; the WSJ original could not be retrieved, so the summary relies on headlines, snippets and supplemental reporting.
Summary
The Wall Street Journal piece, titled "A Hedge Fund That Has a University," is framed around the growing role of hedge fund allocations in university endowments. Its available excerpt describes Harvard as a tax-free hedge fund that happens to have a university, with more than 15 percent of its $38 billion endowment invested in hedge funds. Related headlines in the search results note that the average university endowment has close to 20 percent of its pool allocated to hedge funds, with some schools holding up to 40 percent, and that US universities have more than $130 billion invested in hedge funds. Because the original article could not be retrieved, these figures should be read as drawn from the surrounding coverage rather than verified against the WSJ text.
Supplemental reporting from The Nation, dated March 8, 2016, extends the picture. It cites Yale's $26 billion endowment, which paid hedge fund managers $480 million in 2014, compared with $170 million spent on tuition assistance and fellowships. The same piece estimates that over $100 billion of educational endowment money nationwide is invested in hedge funds, with fees of approximately $2.5 billion in 2015. It also raises conflict-of-interest concerns, citing a 2011 survey in which 56 percent of endowments allowed board members to do business with the university, and the 2013 Dartmouth episode involving trustee Stephen F. Mandel Jr., chairman of the board and head of Lone Pine Capital.
The commentary is critical of the arrangement, but its characterizations are advocacy-driven and should be treated as opinion. Marcie Smith of the Responsible Endowment Coalition and Joshua Humphreys of the Croatan Institute argue that endowment risk-taking magnified systemic risk ahead of the 2008 crisis. Humphreys acknowledges that hedge funds may have a role as a hedge against certain risks in a long-term endowment, but questions their fee structures and tax and transparency practices. Other headlines in the results describe the allocation as a diversification tool rather than an attempt to beat the market, a framing that reflects the institutional rationale for these investments.
Supplemental reporting from The Nation, dated March 8, 2016, extends the picture. It cites Yale's $26 billion endowment, which paid hedge fund managers $480 million in 2014, compared with $170 million spent on tuition assistance and fellowships. The same piece estimates that over $100 billion of educational endowment money nationwide is invested in hedge funds, with fees of approximately $2.5 billion in 2015. It also raises conflict-of-interest concerns, citing a 2011 survey in which 56 percent of endowments allowed board members to do business with the university, and the 2013 Dartmouth episode involving trustee Stephen F. Mandel Jr., chairman of the board and head of Lone Pine Capital.
The commentary is critical of the arrangement, but its characterizations are advocacy-driven and should be treated as opinion. Marcie Smith of the Responsible Endowment Coalition and Joshua Humphreys of the Croatan Institute argue that endowment risk-taking magnified systemic risk ahead of the 2008 crisis. Humphreys acknowledges that hedge funds may have a role as a hedge against certain risks in a long-term endowment, but questions their fee structures and tax and transparency practices. Other headlines in the results describe the allocation as a diversification tool rather than an attempt to beat the market, a framing that reflects the institutional rationale for these investments.
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