There's been a lot of attention paid lately to the vast endowments piled up by the most prestigious universities. Harvard's endowment recently hit $35 billion, which generates so much return each year that tuition is an afterthought in Harvard's budgeting process.
One reason is that Harvard graduates tend to be richer, so they can afford to give more to dear old Harvard. And people try to get their kids in by giving money. Another reason is that a lot of charity is just an excuse to get together with rich and influential people. Where are you more likely to meet a useful business contact -- at a fundraising cocktail party for Cal State Northridge alumni or for Harvard alumni?
But, something else that has been going on is that at least some of the most exclusive, most famous universities have been earning remarkable returns on their investment. Harvard earned 23% on its endowment in the fiscal year ending last June. Yale's endowment manager wrote a book on how he beat the market for some incredible number of years in a row.
I'm sure he's really good at his job, but I'm wondering, though, if there might not be another factor at work in the most exclusive colleges getting the highest returns on their investments.
Maybe they've just been piling on the excessive risk and one of these years it will all come crashing down. Maybe.
Somebody might want to see if there is a correlation between endowment ROIs and various measures of admissions exclusivity, such as are collected by USN&WR.