32 ms·

There's a joke out there that big universities are just hedge funds that do a little work giving out degrees as a marketing expense.

by aqme28 5y ago

tombert 5y ago
I could be misremembering this, but wasn't there some drama about five years ago about schools literally investing a lot of their endowment and the like in hedge funds?
- finolex1 5y ago
  I think it is pretty common for schools to let hedge funds manage a large portion of their endowment. Not sure what the reason for drama is.
  - tombert 5y ago
    I think it leaves a bad taste in people's mouth since hedge funds are typically a bit riskier than a savings account.
    - finolex1 5y ago
      Hedge funds have targets for volatility and rates of return that they try to meet. Endowment managers take such metrics into account when allocating money across different asset classes. They are most certainly not giving away their entire endowment to buy GME. The only controversy I can see is whether the returns provided by hedge funds outweigh the management/performance fees they charge.
      - tombert 5y ago
        That's fair, as I said I barely remember the details of this, and I know very very little about how these kinds of investments work.
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    - carnitine 5y ago
      A savings account is not open to an endowment and will be eroded by inflation. Any university endowment will need to be invested in something riskier.
      - ceilingcorner 5y ago
        Surely there is a stable middle ground between a savings account and a hedge fund?
  - maverick-iceman 5y ago
    Then hedge funds turn back around and put the money coming from Universities back into MIT kids hands. It's seriously telling of why Western economies don't grow like they used to. Money became a hot potato business where nobody has the arrogance to say "Ok, I will do this on my own" The and Bill Gates and Mark Zuckerberg of today aren't leaving Harvard anymore.
- robmiller 5y ago
  I think the story went: 1. Hedge funds donate to endowments 2. Endowments invest back into hedge funds 3. Hedge funds list endowments as investors in their marketing 4. Clients invest with HFs thinking endowments must have done their due diligence.
  - DiggyJohnson 5y ago
    This has to potential to be "chilling."
- adnmcq999 5y ago
  When I was a student at some big state school in 08-09 I overheard some profs talking amongst themselves about how the endowment had fallen by a third. I really wasn’t keyed in at the time to stonks- I was just trying to party and pass my classes, but my ears stood up for that one. I guess almost any large store of money is going to be invested in the market tho
seoaeu 5y ago
I've always thought of it as running an education side-business for tax purposes
whymauri 5y ago
They have investment management companies now. MIT has MITIMCO; Yale has the Yale Investment Committee.
- akudha 5y ago
  This feels just weird to me. I can understand having some money in the bank as a cushion etc, but tens of billions of dollars? Aren't these institutions supposed to further education and spend whatever resources they have for that purpose instead of hoarding and running a hedge fund style investment program?
  - ceilingcorner 5y ago
    Universities stopped being about education when 1) they became a replacement for on the job training and 2) activists began the “long march through the institutions.” Today they are more akin to NGOs than schools.
  - jessaustin 5y ago
    IMHO large endowments are less of a distraction to the purpose of the university than NCAA sports are. The Ivy League simply shut down sports completely during COVID time, which was certainly a better idea than the dozens of colleges who got as many students on campus as they could and then had to send them home within months or (!) weeks. If voters want third-class universities without endowments to continue to exist, they need to elect politicians willing to support those universities with public funds.
  - pm215 5y ago
    I think if you asked these universities they would say that they are taking the very long term view. (For instance the one I went to has been around for 800 years already.) If you are thinking on a timescale of centuries then you want to treat your funds as capital, so you spend your investment income on research, scholarships, building maintenance and other educational goals, but you don't eat into the capital or in 200 years you'll be in a bad place financially. And if your funds are sizeable then investing them and managing them is a big job that you probably don't want to outsource.
robmiller 5y ago
Slightly off topic, but I attended a higher-ed conference a couple years ago and the administrators are all scared about 2025. The birthrate took a hit in 2008 and has never recovered. Peak enrollment will be 2024 and then diminish for the foreseeable future. The expectation is that top tier schools will be fine, just less selective, but the B- and C-tier schools are going to suffer. I suppose they can make it up in international enrollment--that wasn't discussed.

There's a joke out there that big universities are just hedge funds that do a little work giving out degrees as a marketing expense.

by aqme28 5y ago

There's a joke out there that big universities are just hedge funds that do a little work giving out degrees as a marketing expense.

tombert 5y ago

I could be misremembering this, but wasn't there some drama about five years ago about schools literally investing a lot of their endowment and the like in hedge funds?

finolex1 5y ago
I think it is pretty common for schools to let hedge funds manage a large portion of their endowment. Not sure what the reason for drama is.
- tombert 5y ago
  I think it leaves a bad taste in people's mouth since hedge funds are typically a bit riskier than a savings account.
  - finolex1 5y ago
    Hedge funds have targets for volatility and rates of return that they try to meet. Endowment managers take such metrics into account when allocating money across different asset classes. They are most certainly not giving away their entire endowment to buy GME. The only controversy I can see is whether the returns provided by hedge funds outweigh the management/performance fees they charge.
    - tombert 5y ago
      That's fair, as I said I barely remember the details of this, and I know very very little about how these kinds of investments work.
      - deleted 5y ago
        [deleted]
      - deleted 5y ago
        [deleted]
      - deleted 5y ago
        [deleted]
  - carnitine 5y ago
    A savings account is not open to an endowment and will be eroded by inflation. Any university endowment will need to be invested in something riskier.
    - ceilingcorner 5y ago
      Surely there is a stable middle ground between a savings account and a hedge fund?
- maverick-iceman 5y ago
  Then hedge funds turn back around and put the money coming from Universities back into MIT kids hands. It's seriously telling of why Western economies don't grow like they used to. Money became a hot potato business where nobody has the arrogance to say "Ok, I will do this on my own" The and Bill Gates and Mark Zuckerberg of today aren't leaving Harvard anymore.
robmiller 5y ago
I think the story went: 1. Hedge funds donate to endowments 2. Endowments invest back into hedge funds 3. Hedge funds list endowments as investors in their marketing 4. Clients invest with HFs thinking endowments must have done their due diligence.
- DiggyJohnson 5y ago
  This has to potential to be "chilling."
adnmcq999 5y ago
When I was a student at some big state school in 08-09 I overheard some profs talking amongst themselves about how the endowment had fallen by a third. I really wasn’t keyed in at the time to stonks- I was just trying to party and pass my classes, but my ears stood up for that one. I guess almost any large store of money is going to be invested in the market tho

seoaeu 5y ago

I've always thought of it as running an education side-business for tax purposes

whymauri 5y ago

They have investment management companies now. MIT has MITIMCO; Yale has the Yale Investment Committee.

akudha 5y ago
This feels just weird to me. I can understand having some money in the bank as a cushion etc, but tens of billions of dollars? Aren't these institutions supposed to further education and spend whatever resources they have for that purpose instead of hoarding and running a hedge fund style investment program?
- ceilingcorner 5y ago
  Universities stopped being about education when 1) they became a replacement for on the job training and 2) activists began the “long march through the institutions.” Today they are more akin to NGOs than schools.
- jessaustin 5y ago
  IMHO large endowments are less of a distraction to the purpose of the university than NCAA sports are. The Ivy League simply shut down sports completely during COVID time, which was certainly a better idea than the dozens of colleges who got as many students on campus as they could and then had to send them home within months or (!) weeks. If voters want third-class universities without endowments to continue to exist, they need to elect politicians willing to support those universities with public funds.
- pm215 5y ago
  I think if you asked these universities they would say that they are taking the very long term view. (For instance the one I went to has been around for 800 years already.) If you are thinking on a timescale of centuries then you want to treat your funds as capital, so you spend your investment income on research, scholarships, building maintenance and other educational goals, but you don't eat into the capital or in 200 years you'll be in a bad place financially. And if your funds are sizeable then investing them and managing them is a big job that you probably don't want to outsource.

robmiller 5y ago

Slightly off topic, but I attended a higher-ed conference a couple years ago and the administrators are all scared about 2025. The birthrate took a hit in 2008 and has never recovered. Peak enrollment will be 2024 and then diminish for the foreseeable future. The expectation is that top tier schools will be fine, just less selective, but the B- and C-tier schools are going to suffer. I suppose they can make it up in international enrollment--that wasn't discussed.