Educational institutions hold billions of dollars in endowment funds. As of June 2013, the most recent data available, the five largest educational endowments (Harvard University, Yale University, The University of Texas system, Stanford University and Princeton University) collectively managed nearly $110.5 billion. All educational endowments managed in excess of $448 billion.
While they are often critical to funding educational institutions, we actually know very little about the performance of endowments. The poor performance of many of these funds, however, has led to questions about whether the “endowment model” actually delivers superior results.
Under The Microscope
Brad Barber and Guojun Wang—authors of the 2013 paper, “Do (Some) University Endowments Earn Alpha?”—set out to examine the following three questions:
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