
Universities Are Becoming Hedge Funds with Schools Attached (2016) - shahryc
https://www.thenation.com/article/universities-are-becoming-billion-dollar-hedge-funds-with-schools-attached/
======
xtracerx
I always thought that universities being economically powerful could be an
advantage so they could be another pillar of civilization, less beholden to
corporate or government influence. I do wonder if they are using that power
well recently though.

~~~
wahern
I love your point about them being another pillar of civilization, independent
as much as possible from corporate and government power. Well put.

Regarding the use of hedge funds, I think that when you're managing a multi-
billion dollar endowment in a $300+ trillion global finance world, you'd be
crazy not to. Stock markets represent only a fraction of total invested assets
worldwide. Bond markets are larger by far, but interest rates have been so low
for so long that it's hard to grow your money there in a straight-forward
manner. So to diversify without killing growth you need novel but robust (i.e.
not pure play) investment strategies that leverage varied facets of the global
economy, which is where hedge funds come in.

Whether schools should be spending more of their endowment is another question
--set of questions, really. But the talk about hedge funds just seems like a
pointless, sensationalist distraction. Hedge funds aren't merely a niche,
high-risk corner of the finance world like they were a couple of decades ago.
They're still complex and opaque, but so is modern software; that sort of
systemic complexity seems, in part, inevitable.

~~~
MR4D
Your point about diversifying beyond public markets should refer to private
equity, not hedge funds.

More and more over the last decade, the correlation of the public markets and
hedge fund returns have increased significantly.

Of course, this shouldn’t happen given the name “hedge” fund.

Further, an increasing number of hedge funds are shutting down as their fee
structure it too high, and they are being increasingly copied by mutual funds
(e.g long short and global macro funds).

So, while I agree with your disdain at the public outcry toward hedge funds,
I’ve found they are less and less useful for wealthy investors due to what I
mentioned above.

------
kdoherty
I recently ended up in an interesting conversation with a university faculty
member where we found that many of the most endowed universities could
essentially make undergraduate education free and make back the difference
(and often more) on straight interest accumulated from leaving their money in
a bank.

Given that they are probably making _more_ than the current interest rates by
investing, I wonder why students still pay so much for tuition at these
universities in particular.

~~~
charlesdm
Because they can charge that much, and people are willing to pay the amounts
they pay. Wouldn't be very exclusive now would it, unless you're charging
$100k a year?

------
IIAOPSW
Not my school! My school is a Real Estate company with a School attached.

~~~
vibrio
Mine was a hedge fund with a sports franchise attached.

~~~
mywittyname
Found the U-M alumni.

------
dang
Discussed at the time:
[https://news.ycombinator.com/item?id=11331409](https://news.ycombinator.com/item?id=11331409)

------
mywittyname
Did the tax bill move forward with the tax aimed at these endowments? I
remember hearing about it early on, but have no idea if it made it through.

------
vfulco
Wouldn't be surprised if a few have dabbled in cryptocurrencies in arms length
relationship with investment partners while governments blame the technology
for lawlessness. That's often how these things work.

