http://news.harvard.edu/gazette/story/2017/01/course-change-for-harvard-management-company/
Article discusses changes in overall investment strategy, as well as eliminating in house hedge fund and real estate management.
In other news, UF has decided to move it’s endowment out of the local Capital City Bank, and into a checking account at Academy Bank on NE 12th Avenue.
President Fuchs: “We are really happy with the 1.3% interest we can earn with Academy Bank. The free toaster was what closed the deal!”
That toast is going to come in handy.
I won’t be terribly surprised if those internal managers start their own hedge funds and get money from HMC.
Off topic. I am just impressed with what their tax exempt earnings costs taxpayers. If we tax them at a lower rate of 10% or even 5%, we could fund a state U 100% and make it tuition free. For comparison, the top public university, Berkeley gets meager $20M from CA. If you look at tax expenditures of private Us, there’s nothing private about it. Taxpayers are funding to educate elites far more disproportinately than average middle class.
You could insert any type of non-profit in the sentence above where you have “educate elites”.
Would you expect to tax charities like the Red Cross? Organizations like the Elks? Or the big daddy of them all, churches?
If not, then why just one type of non-profit?
Also not sure I agree that all Harvard students are “elites”… yet.
For the record, the size of Gates foundation also bothers me. What bothers me here is the size of the endowments and the contrast of poorly funded state u. I can’t help feeling that we are starving state u’s while lavishing private u.
Absolutely not.
^^^ To avoid any confusion from my response, the post I was responding to above was edited.
Really? With all the good it does in the world (currently eradicating malaria!) while providing 1,400 jobs? Money that one guy chooses to give away?
Underfunded state U’s is a problem for sure. But singling out private college endowments for taxation, while ignoring other nonprofits, doesn’t make any sense. Nor does choosing to tax nonprofits only of a certain size. And not taxing something is very different than “lavishing” it.
He can give away after tax, couldn’t he? His foundation locks up taxes.How much do you think taxpayers will get if Gates’ heirs inherit everything in estate taxes alone? Normally, it’s not an issue since most of them are small compared to the government. When it gets so big as big as Gates, it could act as shadow government choosing what to fund effectively using tax money. Not taxing something is the same as giving away called tax expenditure. Just imagine that if we tax Harvard’s income at the low 5% rate, it brings in $85M. How many state Us can we fund with that amount? Probably all the state Us in the east coast.
@Iglooo, what do you think Harvard does with that money? Do you think it does anything different than a smaller university does with the gifts it receives or the earnings from its endowment? The answer is, fundamentally, no. They are both in the business of educating people and doing research, not paying dividends or seeking to provide capital gains to shareholders. They both spend most of their income on educating people and doing research, saving and investing some of it with the goal of generating more money to educate more people and do more research - because that makes the world a better place. In other words, they are both nonprofits, and the tax code is designed to promote what they do. The difference is that Harvard does more of this than a smaller university, and therefore needs more money to do it. If you have any logical basis for saying that Harvard should be treated differently from any other university based on what Harvard actually does - not just some vague sense that Harvard’s just too big - I’d be interested to hear it.
I think you are underestimating the size of state university budgets. I work at a lowly directional state college, and our overall total budget approaches your $85M figure. The flagship university in my state has an overall budget of some $600M, and ours is probably one of the smaller ones.
So you would rather he not give 100% of it to charity, you would rather 50% go to the government and 50% go to private, already rich individuals? And none of it to the global heath causes where it has been unusually successful?
Either you are pulling my leg or we live on different planets.
Gates just gave nearly $300 Million to a state school http://www.seattletimes.com/seattle-news/science/historic-gift-gates-foundation-gives-279-million-to-university-of-washington/
UCB gets far more than $20M from CA–more than 10 times more.
@DeepBlue86 My use of Harvard was meant to include all institutions with big endowment, Princeton, Stanford, etc.
@colfac92 You are right. Their operating budget is bigger. My bad. The states support amount is quite small tho. Often not more than $10-20M. $85M could double state support in a few state unis. At still reasonable 10% tax rate, they may be able to make a few state unis tuition free.
@Postmodern The way to look at this is to choose some cause you don’t support. How would you feel if Koch brothers set up $40B nonprofit to push their agenda? What if religeous organizations endowments get huge to the tune of $20-30B annual tax free income? Would you feel the same?
“What bothers me here is the size of the endowments and the contrast of poorly funded state u.”
State universities will be adequately funded as long as state residents are willing to do so. That does not have to do with the size of endowments at private universities.
Back to the OP’s initial post, that Harvard has to terminate some of its in-house operations may simply reflect the possibility that it does not has enough institutional nimbleness to complete with outside managers or enough scale of economy (thus efficiency) in investing relative to outside managers. A few practitioners that I talked to argue that the Yale endowment management model is more nimble and effective than the one at Harvard. This could be the reason now we see the shift at the Harvard endowment.
If their agenda were global health and education, and poverty, I would feel great about it. Any political agenda they are governed by laws which are the same regardless of left or right:
https://www.law.cornell.edu/uscode/text/26/527
I would feel exactly the same, since they are and do:
(by the way, that is an article by a Catholic journal trying to downplay the church’s wealth, and it does a very poor job of that!)
- In fiscal year 2016, [catholic medical mission board] received $372 million in revenue *
Not limited to Catholics: https://en.wikipedia.org/wiki/Trinity_Church_(Manhattan)
“The parish’s annual revenue from its real estate holdings was $158 million in 2011 with net income of $38 million,[4] making it perhaps one of the richest individual parishes in the world”.
Not saying this is wrong – in fact I am all for them being tax free. Singling out wealthy college endowments for taxation while ignoring other charities is a big political tell and part of the anti-intellectual movement that I detest.
Never thought I would be here defending Harvard! lol…
Keep in mind that Trinity Church has nice bathrooms surrounded by carved wood available to the public for free (a rarity in Manhattan). I am ok with 38mil income.
Exactly, @Iglooo. You don’t seem to be questioning that big and small universities do the same good things (teaching and research), you just appear to think that once a university’s endowment gets so big that it can do lots and lots more of those good things, it should be taxed. The point at which you decide a university is too big is completely arbitrary, and your argument is illogical anyway, because a lot of the great things that happen at Harvard and its peer schools wouldn’t be possible without all those resources concentrated in one place, attracting the best teachers and students.