Elite schools should take lessons from smaller colleges on endowment management
- Small private schools with minuscule endowments, at least compared to their elite competitors like Harvard University, fared better in their investing strategies for the second consecutive year as Ivy League schools nearly doubled the endowment losses of institutions with $25 million or less in assets.
- The New York Times reports on how schools like Houghton College pulled off what seems to be the financially impossible by reducing endowment spending by .5% and shifting investments from hedge funds to low-index and mutual funds.
- The National Association of College and University Business Officers annual survey shows that most institutions with $1 billion or more in endowment assets typically invest at least 20% in hedge funds.
Smaller institutions with liberal arts missions cannot afford to take large hits in the stock market, as it could mean the difference for a segment of support for operational costs or student aid and having to go without for an extended period. For college presidents seeking to grow their endowments, the strategy of investing into low-index and mutual funds should be a glimpse into the best practices of affordable stocks with low but steady yield, and mutual funds.
Additionally, schools should consider alternative investments such as commercial real estate and startup funding as a means of endowment growth. Depending on the business climate surrounding a campus, these investments could be just as rewarding as savvy stock management.
- New York Times Endowment sweepstakes: How tiny Houghton College beat Harvard
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