Working Paper: NBER ID: w21271
Authors: Harvey S. Rosen; Alexander J. W. Sappington
Abstract: This paper examines whether university endowment managers think only in terms of the assets they manage, or also take into account background income, the other flows of income to the university. Specifically, we test whether the level and variability of a university’s background income (e.g., from tuition and government grants) affect its endowment’s allocations to so-called alternative assets such as hedge funds, private equity, and venture capital. We find that both the probability of investing in alternative assets and the proportion of the portfolio invested in such assets increase with expected background income and decrease with its variability.
Keywords: university endowments; alternative assets; background income
JEL Codes: I22; I23
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Expected background income (D31) | Probability of investing in alternative assets (G11) |
| Variability in background income (D31) | Probability of investing in alternative assets (G11) |
| Expected background income (D31) | Share of portfolio allocated to alternative assets (G11) |
| Variability in background income (D31) | Share of portfolio allocated to alternative assets (G11) |