<p>Harvard is taking some shots here that ought to be aimed at Yale. Yale innovated this investment strategy for endowment funds and literally wrote the book on it. [I forget the name of the book but you can find it easily if anyone’s interested] Harvard copied Yale. So did MIT. When MIT brought in a new president a few years back from Yale, she brought over a person from the Yale endowment fund to run MIT’s. Now there are many of the top endowments with these alternative, illiquid investments in timber, oil in tankers, real estate, hedge funds etc. There is an astounding lack of transparency at these schools as to what has really happened to the endowments and I believe that there has to be alot of CYA and internal finger-pointing going on. The administrations are accountable but the issue is will they be made to account by the trustees. </p>
<p>I am also unimpressed by comments here to the effect that the endowments pay for half (or some other high percentage) of educating each student. The colleges put this out there, but it is utter nonsense. In order to make that claim they include all of their bloated administrative and general expenses, salaries and staffs of professors who dont teach or teach little, benefits and pensions, lobbying, rapidly growing community, national and international social programs, fund raising, etc. This is where their increases in expeditures have been over the last two decades, and it has been funded not only through the endowment but also through unprecedented increases in undergraduate tuition. The issue now is, with the decline in the endowments (greater than 50 % in my view) will they cut back on this spending by 25-50%, to where it belongs, or will they maintain their spending levels by eroding the remaining principal sum in the endowmwnt or by raising tuition. The announced freezes and chills and 5% budget decreases wont cut it when you are looking at losses of 50% and decades of overspending.</p>