Ah, academia.  The proverbial ivory tower.  Many are flush with assets – donations, research grants, sports revenues, etc.

Are they good stewards of their capital?  Do they effectively leverage their knowledge to achieve superior returns?

 

Over the past ten years not one of the 149 institutions surveyed including the wicked smaht Harvard and MIT (#BostonAccent) were able to best the ROR of the S&P 500.  They’d have been better off dissolving their investment committees, firing their high-priced managers and buying a no-cost ETF tracking the S&P 500.

Whoa.  Slow down.  Some things to consider:

  • ROR is only one side of the coin.  Risk is the other.  Institutions value asset protection as much as (if not more than) asset growth.
  • The S&P 500 is grossly undiversified.  It ignores mid-sized companies, small companies, foreign companies, fixed income, real estate, materials/commodities, etc.

Food for thought when pondering whether your alma matter is doing a good job with the cash with which you part when the fundraising call comes in each year.