Why Endowments Are Earning Less From Their Investments

The video discusses how endowments, particularly larger ones like Yale, are heavily invested in private equity, which has traditionally provided good returns. However, smaller endowments are more stock market-focused. The video explores the impact of these investment choices on college spending, noting that some institutions may need to adjust their budgets due to lower returns. The discussion also covers the tax implications for large endowments and the potential need for colleges to rethink their investment strategies, possibly shifting towards US equities.

What percentage of their investments do larger endowments typically allocate to alternatives?

• 60%

• 43%

• 20%

• 75%

Why might colleges need to reconsider their spending strategies?

• To expand campus facilities

• To increase student enrollment

• Because of lower investment returns

• Due to high inflation rates

What is the typical spending rate that endowments aim to maintain?

• 4-5% plus inflation

• 6-7% plus inflation

• 2-3% plus inflation

• 8-9% plus inflation

What is the endowment tax based on?

• Investment return percentage

• Total endowment size

• Endowment per student

• Annual donation amount

Which college successfully invested in index funds for 15 years?

• Harvard University

• Yale University

• Carthage College

• Stanford University