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

60 Pages Posted: 15 Jun 2018 Last revised: 29 Jul 2019

See all articles by Matteo Binfarè

Matteo Binfarè

University of North Carolina (UNC) at Chapel Hill - Kenan-Flagler Business School

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 the expertise of university board members. Harnessing detailed information on 11,019 members for 579 universities, we find that expertise in alternatives 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.
Because identification of a causal effect of expertise and networks on allocations and performances is challenging, we conduct a novel survey of endowment managers and boards (representing collectively over 60% of endowment assets), and confirm that board 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 the Governance of 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 North Carolina (UNC) at Chapel Hill - Kenan-Flagler Business School ( email )

McColl Building
Chapel Hill, NC 27599-3490
United States

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)

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