Universities Are Becoming Billion-Dollar Hedge Funds With Schools Attached
Students are beginning to urge divestment.
By Astra Taylor
Have you heard the latest wisecrack about Harvard? People are calling it a hedge fund with a university attached. They have a point-Harvard stands at the troubling intersection between higher education and high finance, with over 15 percent of its massive $38 billion endowment invested in hedge funds. That intersection is getting crowded. 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. "I was going to donate money to Yale. But maybe it makes more sense to mail a check directly to the hedge fund of my choice," Malcolm Gladwell tweeted last summer, causing a commotion that landed him on NPR.
What has gotten less attention is how it's not just universities with eating clubs and legacies that are getting into the game. Many public universities are also doing so, in part because state support for education has been cut, but also to compete with richer schools by rapidly increasing their more limited wealth. Though the exact figure is hard to determine, experts I consulted estimate that over $100 billion of educational endowment money nationwide is invested in hedge funds, costing them approximately $2.5 billion in fees in 2015 alone. The problems with hedge funds managing college endowments are manifold, going well beyond the exorbitant-some would say extortionate-fees they charge for their services.
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