The Ivy Coach Daily

May 20, 2012

College Endowments

University Endowments, College Endowment, University Endowment, Endowments at Colleges

And how about this tidbit?: According to “,” “Ivy League endowment fund managers get access to the best opportunities: In a 2008 study, researchers from Harvard and MIT sought to explain why wealthier schools, like those in the Ivy League, receive endowments that far outpace other schools. The obvious answer was that high-quality alumni get good jobs for good money, then they donate. But a surprising find was that the excellent investment returns these endowment funds get are the result of managers’ connections and special access to the top strata of alternative funds. In other words, endowment funds at wealthy schools secure the best management talent because they’re wealthy, and the best managers make them wealthier, and around and around it goes.”

What else? The vast majority of the endowment is invested (about 95%). The other 5% is used to fund scholarships, endowed chairs for professors, etc. And why don’t colleges use their endowments to lower tuition, you ask? In order to lower tuition, colleges need to experience more growth years like 2011 (to make up for all of the losses stemming from 2008). They’re even required by law not to force their endowments “underwater” — an excuse many colleges use not to tap into their endowments too heavily. But a paper in the “Stanford Law Review” states that this is not in fact the case under the new law (the Uniform Prudent Management of Institutional Funds Act). But does that mean colleges will begin tapping more and more into their endowments to lower tuition? We think not.

Check out this post on Ivy League Endowments.

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