Working Paper: NBER ID: w14341
Authors: Josh Lerner; Antoinette Schoar; Jialan Wang
Abstract: In recent years, university endowments have received much attention for their spectacular returns and innovative investment strategies, but few papers have examined trends in the endowment sector at large. In this paper, we analyze a sample of 1,300 educational endowments between 1992 and 2005. A striking phenomenon emerges of the "rich getting richer", a dramatic widening of the size gap between the largest endowments, led by the Ivy League, and the average endowment. Growth in endowment size has been driven largely by high investment returns, which are in turn related to the quality of the student body and the use of alternative assets. Elite endowments seem to benefit not only from economies of scale in investment management, but genuine skill and expertise in choosing the right investments at the right times.
Keywords: university endowments; investment performance; educational institutions
JEL Codes: G11; L3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| larger endowments (I23) | higher returns (G12) |
| quality of the student body (I24) | endowment performance (D29) |
| higher selectivity in admissions (I23) | investment success (G11) |
| elite endowments (I23) | widening gap with less affluent institutions (I24) |