How Do Financial Expertise and Networks Affect Investing? Evidence from University Endowments

55 Pages Posted: 15 Jun 2018 Last revised: 12 Nov 2020

See all articles by Matteo Binfarè

Matteo Binfarè

University of Missouri at Columbia - Department of Finance

Gregory W. Brown

University of North Carolina (UNC) at Chapel Hill - Finance Area

Robert S. Harris

University of Virginia - Darden School of Business

Christian T. Lundblad

University of North Carolina Kenan-Flagler Business School

Date Written: May 17, 2019

Abstract

We examine the link between endowment investment performance and human capital. Harnessing detailed information on endowments in higher education, their in-house investment staff, and their trustees, we find that expertise in alternative assets and larger professional networks are associated with higher allocations to alternatives and better investment results. Expertise and networks appear particularly important in private equity and venture capital, which are difficult to analyze and manage. The improved investment performance arises because endowments capture higher returns that can accompany alternative assets, select or have access to high performing managers, and minimize fees by accessing funds directly rather than through funds of funds. Finally, we conduct a novel survey of endowment managers and boards and confirm that expertise is central in facilitating alternative asset investments.

Keywords: Endowments, Hedge Funds, Networks, Private Equity, Venture Capital

JEL Classification: G11, G23

Suggested Citation

Binfarè, Matteo and Brown, Gregory W. and Harris, Robert S. and Lundblad, Christian T., How Do Financial Expertise and Networks Affect Investing? Evidence from University Endowments (May 17, 2019). Darden Business School Working Paper No. 3187280, Kenan Institute of Private Enterprise Research Paper No. 18-11, Available at SSRN: https://ssrn.com/abstract=3187280 or http://dx.doi.org/10.2139/ssrn.3187280

Matteo Binfarè (Contact Author)

University of Missouri at Columbia - Department of Finance ( email )

Robert J. Trulaske, Sr. College of Business
403 Cornell Hall
Columbia, MO 65211
United States

HOME PAGE: http://www.matteobinfare.com

Gregory W. Brown

University of North Carolina (UNC) at Chapel Hill - Finance Area ( email )

Kenan-Flagler Business School
Chapel Hill, NC 27599-3490
United States

Robert S. Harris

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-4823 (Phone)
434-924-4859 (Fax)

HOME PAGE: http://www.darden.virginia.edu/faculty/harris.htm

Christian T. Lundblad

University of North Carolina Kenan-Flagler Business School ( email )

Kenan-Flagler Business School
Chapel Hill, NC 27599-3490
United States
919-962-8441 (Phone)

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
360
Abstract Views
2,495
rank
95,351
PlumX Metrics