Comments on: Why aren’t universities spending their endowments? http://blogs.reuters.com/felix-salmon/2009/08/10/why-arent-universities-spending-their-endowments/ A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: David Merkel http://blogs.reuters.com/felix-salmon/2009/08/10/why-arent-universities-spending-their-endowments/comment-page-1/#comment-5414 Wed, 12 Aug 2009 21:00:42 +0000 http://blogs.reuters.com/felix-salmon/2009/08/10/why-arent-universities-spending-their-endowments/#comment-5414 It’s not uncommon for conservative university endowment spending policies to be less than 5% of assets per year. Modern endowment spending policies don’t care about growth, only total assets.

There’s no story here, except that yes, universities should be taxed on their endowments.

]]>
By: paul http://blogs.reuters.com/felix-salmon/2009/08/10/why-arent-universities-spending-their-endowments/comment-page-1/#comment-5372 Wed, 12 Aug 2009 00:45:46 +0000 http://blogs.reuters.com/felix-salmon/2009/08/10/why-arent-universities-spending-their-endowments/#comment-5372 The original idea of endowments was so that colleges and universities could use the income from that money to pay professors and other staff rather than soaking current students and their parents for the full cost of running the place (modulo grant-and-contract income). So if Harvard weren’t spending on the order of a half a billion a year in investment income, there’s a first-order argument to be made that the poor twits going there right now would have to pony up roughly $30K a year of additional money for their Ivt-League education, or else be attending a much smaller Harvard.

Now obviously some of the people who currently give money to the university endowment would be giving money to the Tuition Subsidy Fund (or whatever fancy name it got called), many of them probably wouldn’t. (Especially considering the kinds of people who give money to ivy-league capital drives). And even if they did, to first order again, the financial effects for the university and its students would be the same only if all of Harvard’s alumni are on average at least as good at managing a portfolio as Harvard’s endowment managers (which may be true in the current debacle but probably isn’t in general.)

Oh, and another reason for universities to have endownments, but not a good one: when there’s an estate tax, the government subsidizes rich people’s gifts to endowments at rates from roughly 50-95%.

]]>
By: ring http://blogs.reuters.com/felix-salmon/2009/08/10/why-arent-universities-spending-their-endowments/comment-page-1/#comment-5347 Tue, 11 Aug 2009 16:45:18 +0000 http://blogs.reuters.com/felix-salmon/2009/08/10/why-arent-universities-spending-their-endowments/#comment-5347 That was a mistake – the remaining Corporation members select one new member whenever someone chooses to leave, but that’s rare. The Harvard Management Company manages the endowment, not the Corporation, but the Corporation decides on the spending rate from the endowment every year, as Harvard’s chief governing board.

]]>
By: ac http://blogs.reuters.com/felix-salmon/2009/08/10/why-arent-universities-spending-their-endowments/comment-page-1/#comment-5332 Tue, 11 Aug 2009 13:41:00 +0000 http://blogs.reuters.com/felix-salmon/2009/08/10/why-arent-universities-spending-their-endowments/#comment-5332 but how to tax government profits now that it too is officially in the business of maximizing returns – or is that to done by taxing bank bonuses which are then funnelled into?

~~~~~~~~~~

“…The 4th largest landowner on earth is the Federal Government of the United States…” http://www.whoownstheworld.com/about-the -book/largest-landowner/

]]>
By: ac http://blogs.reuters.com/felix-salmon/2009/08/10/why-arent-universities-spending-their-endowments/comment-page-1/#comment-5331 Tue, 11 Aug 2009 13:02:37 +0000 http://blogs.reuters.com/felix-salmon/2009/08/10/why-arent-universities-spending-their-endowments/#comment-5331 – pay tax so government can, in turn, pay inflated prices for “research”. Or should universities, instead, spend more on art – or students! Are academics (and universities) real assets? Doesn’t commissioned research bear some similarities to commissioned art? But how on earth can art be compared with an asset like gold as the following attempts to show:

“…When the value of money declines, the value of real assets-unleveraged, irreplaceable assets such as art-rises. In recognition of this fact financial intuitions have already begun to allocate to art. The Harvard and Yale University Endowments have already considered this development by allocating a great share of its investments to real assets. Brandeis University and Deutsche Bank among other institutions have also invested in real assets and specifically in art over the past years and doing so built [“respectable”] art portfolios…” http://www.hedgeweek.com/articles/detail .jsp?content_id=347531

]]>
By: MonkeyBoy http://blogs.reuters.com/felix-salmon/2009/08/10/why-arent-universities-spending-their-endowments/comment-page-1/#comment-5321 Tue, 11 Aug 2009 06:55:24 +0000 http://blogs.reuters.com/felix-salmon/2009/08/10/why-arent-universities-spending-their-endowments/#comment-5321 I see top universities with their massive endowments, tax free status, and generally state of the art and connected financial planning as becoming the new Church.

From the dark ages, to the middle ages and somewhat beyond the Church became an ever increasing landholder.

Yale in 2007 bought the nearby 137 acre Bayer Labs Complex [1] which now makes it similar in size to the Vatican City.

Over the next hundred years, I see rich universities hoarding and growing their endowments and then then splurging occasionally to buy up properties.

Are there any countervailing forces that will prevent Yale from owning one quarter of Connecticut 100 years from now?

[1] http://www.yaledailynews.com/articles/vi ew/21084

]]>
By: Coruscation http://blogs.reuters.com/felix-salmon/2009/08/10/why-arent-universities-spending-their-endowments/comment-page-1/#comment-5317 Tue, 11 Aug 2009 05:02:42 +0000 http://blogs.reuters.com/felix-salmon/2009/08/10/why-arent-universities-spending-their-endowments/#comment-5317 // comprised of Harvard’s president and six alumni chosen by a Corporation vote whenever a member chooses to leave.

If it adds six alumni every time a member leaves, it will grow much faster than the endowment it’s managing.

]]>
By: ring http://blogs.reuters.com/felix-salmon/2009/08/10/why-arent-universities-spending-their-endowments/comment-page-1/#comment-5309 Tue, 11 Aug 2009 01:43:08 +0000 http://blogs.reuters.com/felix-salmon/2009/08/10/why-arent-universities-spending-their-endowments/#comment-5309 The Harvard Corporation decides on a uniform spending rate from the endowment for all of Harvard’s schools every year. The Corporation is comprised of Harvard’s president and six alumni chosen by a Corporation vote whenever a member chooses to leave: http://en.wikipedia.org/wiki/President_a nd_Fellows_of_Harvard_College

]]>
By: The Epicurean Dealmaker http://blogs.reuters.com/felix-salmon/2009/08/10/why-arent-universities-spending-their-endowments/comment-page-1/#comment-5305 Mon, 10 Aug 2009 23:36:12 +0000 http://blogs.reuters.com/felix-salmon/2009/08/10/why-arent-universities-spending-their-endowments/#comment-5305 At fiscal year end June 2008, Harvard’s total net endowment assets were $36.927 billion (before the market plunge). Of this amount, only $6.141 billion or 16.6% were “unrestricted,” which allows the university to use them as it sees fit. $26.170 billion (70.9%) were “temporarily restricted,” and $4.616 billion (12.5%) were “permanently restricted” (http://vpf-web.harvard.edu/annualfinanc ial/). As ring points out above, Harvard may have fewer degrees of freedom to work with its endowment that Conti-Brown suggests.

Furthermore, Harvard is famously decentralized, and while each of its major divisions has mandated Harvard Management to manage their own funds in the endowment, it is not clear to me where the decision lies to change spend rates. While I do not disagree completely with Conti-Brown, I am not sure he has captured all the elements at play, at least at the largest university endowment.

]]>
By: Jeff http://blogs.reuters.com/felix-salmon/2009/08/10/why-arent-universities-spending-their-endowments/comment-page-1/#comment-5300 Mon, 10 Aug 2009 21:49:34 +0000 http://blogs.reuters.com/felix-salmon/2009/08/10/why-arent-universities-spending-their-endowments/#comment-5300 When you take much money sitting around, and combine it with an institutionalized unwillingness to spend it, one invariably comes to the conclusion that that money may not really be there. See Bernie Madoff.

]]>