The eight Ivy League endowments averaged 8.3% return in fiscal 12 months 2023-24 (July 1, 2023, to June 30, 2024). Comparable colleges like Stanford and MIT returned 8.4% and eight.9% respectively. In sharp distinction, the S&P 500 gained 23.5% for a similar interval, nearly triple the Ivies.
To make issues worse, universities allocate tens of tens of millions of {dollars} from their common revenues to their fund managers. Take Stanford, for instance. Its monetary property are managed by the Stanford Administration Firm. For the present 2024/25 fiscal 12 months, the Provost allotted $56.7 million to SMC. Over time these allocations have amounted to a whole bunch of tens of millions. Its head earns over $5 million a 12 months. The workers numbers 59 individuals, employed to satisfy the College’s Variety, Fairness, and Inclusion necessities. Its investments should additionally fulfill the College’s environmental considerations.
What about long-term comparisons for common annual returns?
Time SMC S&P 500
5 years 9.9% 11.3%
10 years 8.6% 15.2%
20 years 9.3% 10.5%
Why the distinction? SMC invests in personal fairness, actual property, and bonds, with a a lot smaller share in publicly listed equities. It should additionally take DEI and Environmental considerations under consideration. Like generals preventing the earlier warfare, fund managers make investments on the outdated mannequin.
Boards of Trustees have oversight on their endowment managers, normally delegated to Committees on Finance and Funding. Over a 3rd of Stanford Trustees are within the cash administration enterprise. One would suppose that adjustments should be made amongst endowment fund managers when their budgets of tens of tens of millions of {dollars} lead to returns that pale in efficiency towards the S&P 500 . In spite of everything, each college claims that it needs to be accountable stewards of their donors presents.
Blunting any change is the truth that serving as a Trustee of one of many nice universities on the earth conveys huge status within the philanthropic world. What most Trustees need is their identify on a constructing, on a number of endowed professorships, and on analysis facilities and institutes. At Stanford, for instance, a 3rd of all professorships are named (endowed) and most buildings on campus are named. Barring a monetary shock just like the 2008-09 Nice Recession or a serious scandal, Trustees usually depart the administration of their universities to their Presidents, Provosts, Deans, and colleges. The Ivies, Stanford, and MIT are blessed with fabulously rich alumni who’re more likely to donate recent cash yearly.