Abstract

http://ssrn.com/abstract=1027450
 
 

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Secrets of the Academy: The Drivers of University Endowment Success


Antoinette Schoar


Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER)

Jialan Wang


Consumer Financial Protection Bureau

Josh Lerner


Harvard Business School - Finance Unit; Harvard University - Entrepreneurial Management Unit; National Bureau of Economic Research (NBER)

October 2007

Harvard Business School Finance Working Paper No. 07-066
MIT Sloan Research Paper No. 4698-08

Abstract:     
In this paper, we have sought to understand what has been the performance of university endowments, and what drives the observed pattern of performance. Our key observations are as follows: (a) the endowments of elite universities have grown dramatically faster than endowments overall; (b) initial endowment size, size of student population, student SAT scores, and membership in the Ivy Plus group are significantly correlated with endowment growth and endowment returns, but endowment returns for public and private schools are very similar; (c) there is considerable persistence of returns across the endowments, particularly among underperforming schools; and (d) alternative investments appear to play an important part in the success of the highest-return endowments, but this strategy cannot be emulated with ease. We also identify a number of unanswered questions. Three gaps in our understanding seem particularly interesting from an academic perspective, as well as practically relevant for those who run or oversee university endowments and other investment pools: the ways in which endowment offices are organized, and how these choices contribute to their success or failure; the viability of the strategies pursued by endowments going forward; and the challenges of imitation.

Number of Pages in PDF File: 39

Keywords: asset allocation, investment management, private equity, hedge funds

JEL Classification: G11, G24, I22

working papers series


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Date posted: November 7, 2007 ; Last revised: February 19, 2009

Suggested Citation

Schoar, Antoinette and Wang, Jialan and Lerner, Josh, Secrets of the Academy: The Drivers of University Endowment Success (October 2007). Harvard Business School Finance Working Paper No. 07-066; MIT Sloan Research Paper No. 4698-08. Available at SSRN: http://ssrn.com/abstract=1027450 or http://dx.doi.org/10.2139/ssrn.1027450

Contact Information

Antoinette Schoar
Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )
50 Memorial Drive, E52-447
Cambridge, MA 02142
United States
617-253-3763 (Phone)
617-258-6855 (Fax)
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Jialan Wang
Consumer Financial Protection Bureau ( email )
United States
Josh Lerner (Contact Author)
Harvard Business School - Finance Unit ( email )
Boston, MA 02163
United States
617-495-6065 (Phone)
617-496-7357 (Fax)
HOME PAGE: http://www.people.hbs.edu/jlerner/
Harvard University - Entrepreneurial Management Unit
Cambridge, MA 02163
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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