How Harvard and Other Colleges Manage Their Endowments
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- Опубликовано: 29 мар 2019
- College is expensive, but there is one place in higher education where there's no shortage of money - endowments. There's more than $616 billion worth of endowments assets in the U.S. Lawmakers are starting to questions why tuition is still rising if some schools have billions of dollars.
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How Harvard and Other Colleges Manage Their Endowments
Do you think schools should spend more of their endowments? Should university donors be taxed on their donations? Let us know in the comments below.
Our local school, East Tennessee State University has an endowment of over 150 Million Dollars. Until 10 years ago, this school maybe had a total of 5,000 students per semester, before opening a medical school. (You should do a story about how UT- Knoxville is the ONLY state school that has taxpayer funding for it's medical classes. The other state Universities are all privately funded through student fees.) While ETSU doesn't have the 2 Billion that Harvard has, for a Hillbilly University, it has entirely too much. They have property on Federal land (the local VA called Mountain Home, and when the medical students go too internships, they work for the local Monopoly hospital system in the area that just recently merged (Mountain States Health Alliance and Wellmont, now called "Ballad Healthcare".) I've lived in two college towns my entire life, Johnson City, TN/ ETSU and my hometown of Columbia, MO/ University of Missouri-Columbia/ Mizzou). How they operate is not a big secret with kickbacks to the city/ county government, land swaps... Colleges are as crooked as the politicians they bribe.
It's school money and they should decide how they want to use it. Just like I do not appreciate to be told how I should use my own money.
You're own money, lol I tell you what, got withdraw 11,000 dollars in cash from the bank, and let me know how that went for you. Do you know anything about current banking or terrorism laws in the US?
Why would I ask for trouble withdrawing $11000 in cash when I can write a check or use electronics payment? I'm more concerned about being robbed once leaving the Bank. The big brother is everywhere as long as your doing legit transactions.
Harvard has 40 billion..... And people still don't understand endowments or foundations
Give this reporter a raise and let her make more videos like this!
Please please do give this reporter a raise! She is fantastic and teaches us a lot!
Seriously , an actual reporter who's reporting facts without bs bias
Indeed. Amazing work
agree!
She seems pretty naive, and she chose to interview people who only reconfirmed her bias, and most her video’s are like this. It’s more punditry, lacking the “both sides” of journalism. Edit: Also, taxing income on investments? Seriously? Why would you tax capital that is going directly into funding the university, or will be later reinvested to fund the future of the university? Then what’s the point of the tax-exempt status in the first place? And if implemented, it will eventually expand to a larger subset (as all taxes do), and will begin to hurt the smaller universities the most.
The amount of research done for this video is crazy impressive
However though the space was not available to be in any way possible to be able to use it as an example for the first few times in this posting.
@@dbaparadoxicality8414 I'm sorry I don't understand what you just said, could you re-explain?
I feel like I’ve see her on Vice news...
@@yummymommy2275 CNBC are pros and knowledge while VICE is more likey biased
Not really
Lets face the truth, this is business, and people are overpaying for it.
@Steven S please explain how they paid. because tax deductible donations are not government paying for anything.
If you think people are overpaying it's because you've never made any significant amount of money in your life. People are not overpaying. Going into a McDonald's and paying 200 bucks for a Big-Mac when the price is 6 bucks is overpaying. Going into a McDonalds after hours and convincing the staff to stay open, work later, turn the machines back on and custom make you a BigMac for 200 bucks is not overpaying.
@@Peter-om1zj If I would have to take an extreme example how Universities work now I would describe it like... paying somebody to check if you read books that he previously told you to read. It sums up to few hundred books during whole studies. And for that kind of service you pay tens of thousands of dolars. If this dont sound like overpaying, I don't know what does.
they are over paying because the govt offers a blank check via student loans. If there was a cap on the loans, colleges couldnt charge stupid rate and would be forced to control costs
Students would take it more seriously knowing how much they just paid for a class. It's the for profit organization that need more regulations. Most of public schools provide very good value education.
This is what a real reporter looks like. Unbiased, researched & straight to the point.
+
Interesting how this video is considered “liberal propaganda”.... the elites are trying to make sure this isn’t called out!
@Bob Watters Socialist? CNBC?
This was an _excellent_ piece, but there was noticeable bias.
One example: comparing an entire endowment fund to a _single year's_ operating expenses (6:32):
"That 5% sliver is for the operating budget" Right. 5% is for _one year_ and the remaining 95% needs to last for _another 400 years_ . 5%/yr versus 95%/perpetuity. A fair comparison uses ratios.
Likewise: sure, a donation generates a $30,000 tax break. But _only by parting with $100,000_ -- obviously suggesting the donation was a $30,000 gain to the donor was intentionally misleading (17:49)
Again, the research is phenomenal, but the bias raises questions about how much was misrepresented.
@Bob Watters "phenomenal" because of both the research's comprehensiveness (social, historical, economic, legislative perspectives on this matter) and also its depth (for example, identifying the relationship between partners common to various investment funds of multiple universities... that looked involved). It's accessible and informative.
I think it's hyperbolic to say "they completely misrepresented basically every piece of data." Of course, evidence to the contrary is welcome.
If you think there's an imbalance between facts and propaganda, please provide relevant facts. Plenty of us still deal in facts.
To be fair, $10,000 in 1977 is the equivalent of $41,436 in 2018. Still, it shows that spending per student has doubled.
I think 10k is in modern dollars. Someone should check since I am too lazy.
$10,000 is most likely adjusted for inflation, there’s no way that college cost that much back then, since the tuition increases over the past couple of decades have been near exponential
I wish they had specified on that stat.
promi stans loona we are talking about Harvard though
Don't forget that rent was much lower and paychecks higher relatively speaking
"We are not talking about donating a building, so that a school's more likely to take your son or daughter"
The issue isn't 'bribery'. Its that what was being done was fraudulent.
You donate the money for an endowment/building, it benefits the students - and it usually allows the university to accept more students they would otherwise be forced to turn away.
You BRIBE individual(s) - they just take the money, the university/students see none of it, and the system ultimately suffers and loses integrity.
Both put students from rich backgrounds at an advantage - this is true. But if you're going to donate millions to an institutions that ultimately provides some benefit for others, is that not worth one lousy spot on the enrollment(?)
@@MrFuggleGuggle The bottom line is that schools allows bribes in lieu of merit. From your argument, you seem to indicate that the only problem with most bribery is that it only benefits the person being bribed, but lots of federal bribery cases involved people doing just that (taking money to save their company and its employees).
@@FurEngel If you really cared about merit, nobody would be applying to USC, Harvard, Yale, or any other high end or Ivy League school. All degrees from all institutions would be the same and have the same value on the market, correct? Degrees themselves have no value then if just anyone can go to a Library or the Internet and acquire this knowledge.
But that's not the case. You're applying to those places because they market themselves as better than others, and some jobs/companies automatically associate those schools for their quality simply from the prestige of the school's name. Getting a job simply because of nepotism, or 'prestige' of your alma mater isn't merit either.
But they're not going to completely tear down a system that's worked for millions because your silly textbook definition of ideals, nor will they stop accepting endowments just because you view them as bribes. If you believed all gambling should be outlawed, the entire Insurance industry would be abolished, plunging the economy into chaos and ending millions of jobs.
Reality check.
@@MrFuggleGuggle Are you saying giving money to a school's endowment in-exchange for your child to be admitted is not bribery?
I wonder what Khan Academy is up to?
If Sal charge a small fee for premium services, KA could stack some serious cash. That's capital that could further develop new services for everyone to use.
J K ....you’re kidding, right?
They tend stay away from higher education courses. They mostly educating students until SAT tests.
For higher education courses there are edX, Udacity, Coursera, etc.
You
@Rafael Arturo Mateo Núñez A better method would just be ads. Chegg and every other education platform would want to advertise there, plus their videos are directed towards college kids which are big money ads. I wouldn't like to see it but if it meant creating a massive collection of free courses, I think it'd be an okay sacrifice.
"Money is power."
&
"Those who gain power are always afraid to lose it."
OK, I work for a small community college in a poor state. Our endowment is about $20 million. We also don't have $30,000 a year tuition (about $3,000 is ours). Our endowment helps our students, they will pay for tuition when financial aid runs our, they will even pay to fix our student's cars. I am proud to say that last week, we used our endowment to pay off ALL of our student's education debts.
Whew this woman has done her work!!! Doing her research!! Hope she making good pay!! You deserve it girl!
Are you kidding? She said completely ignores the financial purpose of endowments and created an emotionally charged piece to destroy higher education.
I'm surprised how reluctant these colleges are to share information. Now I really start to appreciate the Freedom of Information Act in the UK.
YB--Yale Baupost
HB--Harvard Baupost
PB--Princeton Baupost
Cmon its pretty obvious...
"From its founding the firm's three private partnerships have generated an average annual return of 19%."
en.wikipedia.org/wiki/Baupost_Group#Performance
Founded in 1982, so 19% average annual return for 37 years straight. Almost as good as Warren Buffet.
With performance as good as that, WHO CARES how much they are paying their funds managers.
@@noblelies Klarman is amazing
noblelies 19% is INSANE! What?? How!
?
Being obvious is one hand, the other hand is how you proove it
I worked in private equity. So much money from pensions,endowments,etc. Its insane.
@Bob Watters bro why r u attacking him, he just said theres a lot of money from endowments. wtf r u even talking about lol
That's some good ass reporting, well done.
This girl is a stealth ninja infiltrating Harvard, University of Texas, and Yale ! They should all hire her to represent them in public relations! 🤓💻
As this was Pre-Covid I‘d love to see a follow up on how they spend money over this period and how they managed the lock-down time in comparision to other colleges
17:00 Most british indian dude I've ever seen "oh tank you Kelly indeed we were!"
LOL !
He sounds more like someone educated in an Indian private school.
He is Indian Indian trying to do a American accent.
He sounds like a Harry Potter teacher
After I heard him, I came SEARCHING for this comment.
Damn lady, your research snapped.
Rich Person: "You're taxing me too much. That's unaffordable anyways."
Congress: "Okay."
RP: *Buys 5 yachts and smuggles an Indian Tiger into the country.
This guy knows what he's talking about.
Ivan Esquilin Jr. the rich were being taxed too much, why are we punishing success?
@@wut_1459 because we have people saying they were taxed to much and their out buying super yachts. And we have a minimum wage that is so low it forces the government to subsidize workers paychecks with food stamps, welfare, things like that. There's nothing wrong with being successful or buying a yacht. But everyone needs to pay their fair share. The government shouldn't have to subsidize a workers pay while the CEO is complaining he's taxed too much. There's a fine line between being successful and being incredibly greedy and successful.
Droptown Ramen : Rich people and success?
No rich people are rich because they use legal loopholes and offshore accounts to avoid paying taxes. Do your research.
Even if said rich person deserve the money, does the children and grandchildren deserve it? They didn’t work for the money.
Wut _ you know up till the 80’s they were being taxed up to 90 percent and their money to us getting to the moon and social security and medicare and our roads and education
If the money is truly sitting somewhere accumulating why would they be so concerned about a small tax on investment profits? The way things are currently being handled these endowments sound like the perfect place to launder money, cover ponzi schemes, and hide taxable income.
Liberal lunatics don't realize wealth doesn't grow from trees. Money is valuable only because we make it valuable. It also is not distributed by some Santa Claus in the sky to select individuals. The rich are only rich from creating companies, medicines, etc...
@Ray 123 we arent socialist and never will be. Certain jobs pay less and others pay more, there is a reason why mcdonald workers make minimum wage and surgeons make more...
@Ray 123 I disagree with that, you make what you and your employer agree upon. Want to work for 25 cents an hour? Go ahead. $100? Go ahead. Don't dictate to an employer how much he or she has to pay.
@Ray 123 and socialism is companies controlled by the community. You are controlling the company. Thus, you are a socialist.
@@JW-mr5mh Incorrect- you are misrepresenting what socialism is. Thus, your argument is flawed.
The returns from the endowment are what allow the university to operate, grow and improve. If you spend more than your return and dip into the endowment itself, the endowment shrinks and next year you have fewer returns to grow.
It is absurd that she leaves this crucial context out if the piece!
Damn girl, you dug up crazy dirt on these people. Home girl out here doing work!
It's a good video, but there's a problem with the part where you mention only 5% of the endowment is spent on operating budget. That's how it should work, because the endowment is a stock, while the yearly expenses are a flow. Spending all of Harvard's endowment in a year would be the equivalent of cashing out on your 401K and spending the money in a year. The logical idea with any fund is to withdraw only a small percentage, so you don't spend the principal.
You're asking the media to understand business principles. Free college & taxing the rich looks much nicer on a picket sign or bumper sticker.
Exactly ppl do not want to understand this or know this but conveniently put this on the back burner of their mind. Using your endowment to sustain the operating budget or tax donors after they have gifted money that is already restricted for scholarships for different types of applicAnts
Exactly.. That snooty yale law guy has no clue how investing works. Which is what an endowment is. It's an investment account. Clear example why higher ed. tenure is problematic. Like get this clown out of here.
@@jacobthorp6011 Look at her nose ring and you can safely make tons of assumptions that are probably accurate....
I can’t believe she completely ignores this fact. Divesting endowments would be devastating to higher education.
It's misleading to highlight how they spend "only 5%" of the endowment on education. Of course they do, because the real rate of return on the endowment is about 5%, so if they spend more than that the endowment will shrink exponentially, leaving even less future resources to give back to students. Disappointed in the fuzzy economic analysis of this topic.
Yeah, I'm so shocked that the basics of an endowment aren't explained.
As long as it isn't growing at a huge rate, they're spending as much as they should be it sounds.
Yeah this. Norway has a sovereign wealth fund which would be quite comparable, and the operating philosophy is to not use more than 4% a year, to avoid the politicians making promises they pay for with money meant for future monetary stability. In practice we rarely see more than 3% being spent during the later years. The return from the fund makes up a sizeable portion of the Norwegian budget and not allowing it to be tapped makes sure it stays that way and gives a possibility to increase spending during bad years.
It just seems like sound fiscal policy. If they want Harvard to remain economically accessible for anyone not able to fully pay for it by themselves while also wanting Harvard to have the same expenses they do today, Harvard needs to rely on having substantial income from their fund from the forseeable future.
One can of course think it's waste that one university spends that much money, which could have been better spent in terms of socioeconomics by spreading it out over more students, but that is not what is being criticized in the video. This was a really strange video.
This is nothing more than SJW fuzzy economics. Of course Harvard only spends 5% of the endowment. It’s average investment return is around 10%, so they spend half of what they make and save the other half. Otherwise, the endowment would shrink and disappear. Then, NO ONE would benefit from it.
How is the rate of return only 5%? I thought universities hired professional wealth managers. Universities would be better off investing in an S&P 500 index fund.
No the real point is is that they're 5% return is used for the fat salaries of the professors and not to Aid the students. If they lowered the salaries then the students could probably go for free.
For all of it's shortcomings, I am glad that the best colleges in India are government colleges, and there is no consideration given for admissions to the kids of those who choose to donate. Also, higher education in India is sooo affordable compared to the US. My entire fees for Engineering Studies was around 3200$, including hostel accommodation.
Yeah but India’s universities aren’t as good
@@thisguy6177proof?
And when International Students from low income family, asking for application fee waiver for PhD, Stanford said NO. The reason "we do not have sufficient funding to waive the application fee".
International students are well not their respnisbility
Well international students are not their responsibility duuh
I'm not sure if people understand the situation.
Suppose you've been laid off so you don't have a reliable revenue stream, you have to live off of your savings, and you make most of your money by pleading others for donations. How much of your savings would you want to spend each year? If you're prudent, you would want to spend that saving as slowly as possible because that's all you have. Schools, unlike a corporation, do not produce widgets or services that generate a reliable stream of revenue. They literally beg for a living (they beg their donors). For example, the video show that the average spending per student in 2018 was 80K, but I think the average tuition at a top school like Harvard is only around 70K, so what we must understand is that top universities do not make money on the tuition they charge to students. They make money by begging for donations AFTER the students have graduated and become successful.
Universities do not generate significant profit (relative to the operational costs), so spending only 5% of their saved up money is prudent and necessary in order to ensure the long term survival of the school. These schools are built as social institutions that are meant to last for centuries, not just fly-by "education corporations". Can they do more to make college more accessible? Absolutely. But not by focusing on spending a bigger chunk of their endowment.
And to build up to your point, they need that endowment to help out students forever, theoretically. It's like an annuity, and, to give out annuity, it needs to maintain a certain amount of fund so that they could give out a portion (which amounts to $1.6B).
Extremely well-stated!
They spend 5% a year so they never run out and it continues to grow.
You know several of those millions are going in someone's pocket.
Jaden Urbri makes the best videos, she throughly researches things, has a relaxing and clear voice, and gets straight to to point! Give our girl a raise
Give all that endowment to this journalist. 🔥❤
@17:50 they didn’t “save” $30k, they prevented forfeiting $30k to taxes by going above and beyond and donating an add’l $70k, that way $100k was used to fund education, giving donor sense of purpose
tbh, I was quite bewildered when she said that they saved 30K to themselves. I immediately got myself a notebook and a pen and I started scribbling, doing math, like wtf is going on. Tried stuffs with x, y, z variables and din't quite get how the heck they are saving 30k lol
As unfair as this all may seem, I am benefiting from this system as a first-generation, low-income student. I am attending one of those prestigious schools on full financial aid (including grants for a laptop, winter clothes, a plane ticket back home, etc.), and I can't help but agree with Michael Strain's argument at 19:32.
I ultimately think the best way to deal with this is to improve primary and secondary education across the country such that more low-income students have a chance at being accepted into these schools (as compared with higher income student who typically attend more well-endowed schools). The financial aid office at my university in particular has said that they make sure to keep enough money on hand that if they were to complete admissions one year to find that _every_ student would require full financial aid support, they would be able to meet that requirement.
Lies again? Ivy Fund
I think you are going to a capping ivy league🧢
Soo... they are the people who have been buying up all of our Bulgarian agricultural land here!
Heyy,I am bulgarian as well
You are everywhere, aren't you?
Even in Romania, I think they bought some forests.
PS: please promote her before Bloomberg hires her! @Bloomberg @WSJ: You should hire this reporter asap! This is truly exceptional reporting and we love it!
Harvard bought a lot of agricultural land in Romania.
Csaba Mihaly what for ? Not that I went to Harvard.
David yu Harvard doesn’t exist... it’s a dictionary title... so the reason behind buying agricultural land in Romania would be to the benefit of whoever is the shareholder/owner of Harvard... and who is that?
2:11 The endowment for University of Texas/Texas A&M is for at least 6 different schools.
true but I'm pretty sure UT Austin gets 2/3 of the endowment
It's definitely not split evenly UT Austin gets a majority of the fund
Yeah agreed, that was just CNBC specifically phrasing things like just one school held billions and billions of dollars
14 educational institutions though that is 8 colleges and plus six standalone health institutions which are partly medical schools.
@@Loathomar lol but if you look at the endowment spared to the non flagships... Besides UT Austin I don't think there's another UT system college that gets allocated anything more than 1 billion. I think only UT Dallas has a 1 billion endowment. As for the medical schools that makes sense.... research centers like the cancer research center in Houston are literally the best in the country. Way.... ahead of Harvard.
3:29 - "There's an element of mine is bigger than your's is."
Well, I mean, that's a given. They're called *endowments*.
11:15 His barber should be arrested.
"You're telling me you've sold every toupee in this wig shop? You must have at least one left?"
What on earth happened there though... Unsolved mysteries.
Only comment that is worth it.
To the people who make this RUclips channel happen, thank you!
Everyone, the producers, reports, video editing, social media, all y'all. Interesting topics, informative, *actually* relevant, thought provoking, and never boring.
There's an interesting conversation to be had here. I believe, this reporter, in particular, and I could have a pretty interesting conversation on the topic. Higher education is far from perfect. Administrators, Professors, Support Staff, on and on and on is riddled with rent seeking behavior. That's a conversation for another day though.
However, Harvard's endowment fun seems to be the least of these issues. In fact, I'd go as far as to say that it's the single highest performing entity in higher education. It's the goal, not the problem, from my perspective. All of the points made were great points. There's always give and take. My background is in accounting and finance, which made it interesting to hear the points being made perceived as being a negative. My brain perceives it, not just as a positive, but as the most positive, positive, and a framework for adoption across the country.
For what it's worth, I'm not Harvard material, in more ways than one. I simply went to an institution, state college, that could greatly benefit from adopting the policies Harvard has.
Delaying instant gratification for future success. That's what their doing. The United States would be in a much more advantageous position, economically, from the bottom-up, if our state governments, federal government, or universities showed the same restraint.
A way to encourage rich people to give to poor black colleges in the south would be to give them more tax break when they make donation to these colleges.
J1rst That’s exactly how you don’t do it. They will exploit the tax breaks like crazy.
@@okas425 How bout Historical Black Universities first get their Fed Education $$$ that have been owed? Not only will corporations exploit tax breaks they will also use their position to push their agenda in curriculum. If we don’t trust the culture in Corporations how would we trust them in schools where most of them wouldn’t attend? How many corporate executive boards are racially diverse enough to make this a reality?
Thanks for the info! This was very well put and organized!
This was very interesting to watch. Thank you for the content!
Amazing report! Thank you CNBC and well done Jaden Urbi! Keep up the great reporting!
Alos, don't forget that Elite colleges get a cut of all the lottery money that isn't won/claimed... The money that was originally meant for public schools.
source? can u provide link?
HB, YB, PB. The initials are clearly Harvard-Baupost, Yale-Baupost, and Princeton-Baupost.
Klarman is the goat
The guys voice at 17:00 is something else. Also that person was so right about endowments only divesting when it looks worse for them to not take action that it does for them to take action
As well I'm no republican but the tax on endowments over 500,000 per student sounds great to me
17:02. His voice, the best part of the video.
That tax rule was controversial b/c Berea College got caught up with it. BC is well-known for providing free tuition to students from lower income households. It was also the first non-segregated school in the south.
I agree with one of the last things said. With advancement of modern technology, there are more and more ways to get educated even on a high level without going to a residential college campus. If college tuition stays like this or keeps rising, more people will ditch college and opt for a cheaper alternative which might just have the same quality.
One more thing - most publications which rank universities take endowment into account when calculating rankings, so the bigger the endowment the higher up the rankings the university is (of course, the relevance of using endowments in school rankings is yet another mystery)
This video seemed very well researched. Good job!
This video was SOOO well done! Great stuff!
Taxing endowments, especially for elite universities, is a rare thing left and right can agree on.
Total eye-opener. Much appreciated.
it's a big racket primed for disruption but there will be a hell of a fight!
This was a tremendously informative video, great research and great reporting!
Are you kidding? She said completely ignores the financial purpose of endowments and created an emotionally charged piece to destroy higher education.
Excellent video! Amazing format, guest speakers, production and just about everything. Please keep them coming!
The sad part of this is that the government is taking money away from education by not funding one end and then taxing the little the other end does give away. Rather than helping education, they constantly push and take away with very aggressive measures; chooses punishment over cooperation.
I have to say that cyclical perpetual wealth investment is a sad thing to see. Why do we need money if it's just going to stagnate. If you think about it, it is worthless; its sole purpose to be sitting in an account. Si of course these "endowment managers" saw an opportunity and freeze these accounts for them to be paid, holding their spending like Gollum his ring.
Sadly, the more one knows about the US and its systems, the more sad and depressing it gets. Seems to me that the country has moved away from the land of opportunity to the land of the opportunistic. People do need to wake up and fight for social justice, gather back their wealth and land, and work together instead of snatching things from others. Is it too much to ask?
In all honesty, colleges should cap endowment management payments, check their profit margins and reinvest into students to implement free or low cost tuition, keep that flowing for the benefit of the students and staff. Government should then help them out but also keep them in check to again look out for social benefits. While not everything should be used, what's the max investment that could be run without or with minimal loss. 5% is just a joke.
Are you kidding? She said completely ignores the financial purpose of endowments and created an emotionally charged piece to destroy higher education.
I have been a CNBC fan for many years & it is because of reporting done by Jaden Urbi, I subscribed to this channel! Keep up the excellent work!!!
Tyt
Everyone shut up before I crush you with my wallet - Harvard
The reason why endowment only spends 4% a year is to keep the principle and have the endowment grow. So if I give 1000 to Harvard then I know that in 100 years from now the $1000 is still going to be there but along the way, it would have put money for the university.
My low family income, Marxist raised daughter received a full scholarship, four year degree from one of these very prestigious high endowment colleges- a degree which included paid for internships in Washington D.C. and the purchase of any relevant technology for her degree in 'Government'. We pursued this option in parallel with those provided by our State University system. Even though she was required to obtain available 'Pell' funding- leaving her with some debt- her overall costs were less with the 'more expensive' private institution than our public institutions would have provided.
We planned ahead, did our research, and it paid off- thank you Smith College!
stumbled upon this during quarantine, love this reporter
Fantastic reporting and very polished video production!
This is great journalism! I commend this reporter and CNBC for doing such excellent work.
17:40, That's not how a tax break works. The donor is not "saving" $30,000. Instead, they are donating $100,000 from their income before taxes. Alternatively, they could decide not to donate anything. This would "save" them $70,000, while the remaining $30,000 would be paid in taxes. You can't take home more money by taking advantage of a tax break, the tax benefit lies with the recipient.
Tax credits do come off your tax liability dollar for dollar
@@NicholasLittlejohn Right, but we're talking about tax deductions, not tax credits.
This is such an eye opener!
Seth Klarman has been super secretive since writing Margin of Safety back in 1991, but I was able to call Baupost and talk to him on the phone. Would've been interesting to see him comment on the story.
Klarman the goat
Put an indexed threshold per head of student at which these assets are no longer concession tax treatment. Once they cross the threshold treat the entirety of the assets as non compliant and tax the income (not the donations) at a punitive rate.
This is stupid. They barely grow at 5%. Spending most of what they make is already most that you can expect of them. If they spent 10%; the whole endowment would be gone in a few decades.
That's not true if these were invested in the S&P 500, instead of actively managed with alternative investments. Long term returns from just "buying the market" (meaning investing into an index like S&P500) are better for the average investor. Clearly, Harvard doesn't have the kind of access it would need to better performing investment managers. It could earn a consistently good rate of return.
@@butterplum2053 University endowment portfolios have different risk profiles than most investors.
Also it's near to impossible to find someone able to invest billions and still get double digit returns from non risky assets.
Most are either risky cowboys like George Soros or just get lucky.
For every Soros you'd get a thousand zeros.
@@abz998 There is no need at all for universities to define their risk profile differently than a pension fund. For that matter, no reason to behave uniquely from a pensioner with a low risk tolerance. Meaning, there's no reason that they need to pursue double digit returns at all, but if they must they can pursue the market portfolio and the market return.
@@butterplum2053 Assuming they have a fairly good reason that they're avoiding those types of portfolios.
Pension funds are different beasts altogether. They're mostly concerned with payouts decades into the future so to an extent could roll with the economic cycles while endowments still have expenses due regardless of where in the cycle we are. This then leads to a different risk profile.
Not saying that they can't do better but just that it's hard to whilst still staying within the risk limits they are forced to work under.
@@butterplum2053 Look, it is market growth minus inflation growth. Spending 5% of your investment while trying to keep your investment means you need an ROI of 7-8.5% depending on inflation growth. Look up the Annualized S&P 500 Return (Dividends Reinvested) when Adjust for Inflation (CPI) over the last 20 years, it is 3.721%. Questions?
Excellent job by the reporter Jaden Urbi. That took a lot of effort to get these important facts!
17:02 Did you hear that? 😱
Don't hate the players, hate the game. I expected nothing less from Harvard
These are the best-Thanks CNBC
These institutions are private, they operate like companies. So why do they get public endowments from the government? When you can't disclose what's happening with the money, why should you get it? Same for private banks
HB = Harvard Baupost
YB = Yale Baupost
PB = Prinston Baupost
Klarman the goat
This was well researched and well explained. I'm not into financials but she made it very interesting. Kudos!
Are you kidding? She said completely ignores the financial purpose of endowments and created an emotionally charged piece to destroy higher education.
Could I get the full citation for the "Bankers in the Ivory Tower" paper from which you got the correlation chart at 13:10? I found a Berkley paper with that same title and address similar things, but no such chart existed in that one. Please and thank you :)
Is it really that strange that a low-income student is unlikely to afford an expensive college? 😳
OMG the first step is so freakin' simple. It's to get rid of the carried interest loophole. Like the video says (16:55) the Harvards and Yales invest around 6% in Hedge funds and 21% in private equity. Those hedge and private equity funds charge around 20% (16:30), sometimes even 30% (17:20), in the form of an incentive fee that is taxed at the lower capital gains rate, the so called carried interest loophole. Then these hedge and private equity fund billionaires basically donate a portion back to the University, so the university keeps investing in them, including sending your tuition money to the hedge or private equity fund. The donation to the school is really just a kick back, with money made risking YOUR tuition money and not the money of the hedge or private equity firm which customarily receives a 1-2% management fee even if they lose your money (16:30), income taxed at lower tax rate because of the carried interest loophole, and money that is then kicked back as essentially a bribe that is tax-deductible. I honestly don't care if you tax the endowment itself; that's really not the problem. The problem is how universities are allowed to divert your hard earned money, the money that you pay in tuition, to the pockets of hedge and private equity fund billionaires.
BTW, I realize that your tuition doesn't actually go towards the endowment directly, but it translates eventually to alumni donations which do, and it also means that the university has to spend less of it's endowment..
Well this video that does hit some good things, like lacking of transparency and misaligned investment goals vs. ethics, I’m afraid the makers don’t know too much about endowment from an asset management-side.
Managing endowment is an extremely difficult task that’s merely possible to accomplish well in the long-term. David Swensen wrote a book couple of years ago on that topic, and it’s one of the best reads I ever encountered on asset management. Basically the size of the endowment has a direct positive correlation with the teaching quality & independence of a school.
chingon gracias por compartir
Wow, this is a good one.
I checked my high school's tax return, and the guy in charge of financial office gets the highest salary as well....
Great reporting and video thank you
Amazing research and reporting. Props to her
Wow I actually agree with Chuck Grassley. Time to tax the university's endowments. Also, Universities don't have to pay any property taxes. That's why they buy up so much land. Same with churches. Time to tax both.
Great topic..
The company I work for gave 35M to Carnegie Mellon, which is already a rich university with tuition in 6 figures, obviously making way for the CEOs kids to get admission there, atrocious
traditionally baptist universities are some of the best on using endowments. the endowment of Liberty University spend 1.1 billion on building upgrades, tuition freezes, and undergraduate textbook distribution.
The universities are getting richer and richer and student debt are always on the rise. These universities are part of the problem.
Good video- Endowments should spend more on students and faculty. However, do remember that a lot of money is tied to projects and specific goals by the donors and can't be just used. In terms of ethical/ sustainable investing, many endowments have a committee that has quite high bars. Also, you cannot just cherry pick some investments and say that the whole endowment is corrupt. First, sometimes endowments are fooled and do not know exactly what the manager is doing. Second, they do have to make a return- Many pensions invest in tobacco companies because of good returns. Of course, that is quite wrong- But the pension fund needs to have returns to pay off its pension. I am against it but pension funds says well we need returns....
Please do not underestimate the positive influence of ivy league schools and its endowments. That endowment money allows a lot of research and great programs. Harvard and Wharton have great podcasts and they are all FREE. Also, if you go around RUclips, they have a lot of lecture, speaker videos, debates by experts and very accomplished people. All of that is also shared for free. Lot of white papers, working papers, and presentations are produced by support from the endowment and shared for free.
Those who complained about people not being able to get good quality education, please check out edX and Coursera. You can take most courses for free from the best universities-
For those who complained that college is a scam- Yes, it can be a scam if you don't learn anything. I highly suggest that you learn from edX, Coursera, udemy, Udacity, Great Courses, Masterclass, and just plain googling/ RUclips-
If you want a degree and want to keep cost low, you can go to a community college and transfer- Also, you can always graduate early- You can also check out Scholly, a scholarship app, to get more scholarships-
Some investment advisory companies work strictly with University Endowments. There’s an unheralded Boston based company that does as such. They do a pretty amount of business with them.
The funny thing is they do not trade on Endowments behalf. All they do is the research on where to invest the money, on a continuous basis, and then charge for their services. Endowment managers are not handling the bulk of their wealth chest willy nilly to Wall Street.
Finally we talk about this!
Harvard contributes 5% towards their operating budget because that is around their average annual return they get from investing the endowment. If they began to spend more than 5% each year (more than their returns), the endowment would eventually run out. It is because of this endowment that they are able to create $1.8 billion and use it for financial aid and other programs. These big endowments seem like the rich are hoarding the money, when in reality, they have created a portfolio that is able to help students forever.
seems to be the best way to think about this whole thing
i guess the only thing that remains is
why do students have to pay so much?
are they just perpetuating a system that doesn't work in the first place?
that isn't accountable to anything?
what are universities accountable too?
Ah, so this is how they tweak with the legality game. Thank you for your candor and journalistic integrity. Like the Limited Edition LV or Hermes Birkin bags (long wait list & we offer only limited seats every year even though we can definitely afford to expand the freshman class seats or build extra buildings). We offer 100% financing for those who qualify (Visa + Mastercard + American Express + Discover). Very interesting "language" @7:42 "Student aid this past year Enabled 1 out of 5 undergrads to Receive 100% of their tuition, room and board paid by the University...." It Sounds like 1 out of 5 students are given 100% generosity. But it doesn't directly say "awarded or given $______________." Nor does it include phrases like "Full Ride" (itemizing tuition + room & board + books & fees) or "Full Tuition" here. "Student aid" = undisclosed $ amount (maybe in an index chart/report for Blue Chip Investors?). "Enabled" = $6,500 (2018-2019 average Pell Grant for low income) + other non-Ivy scholarships + parents' savings & assets + subsidized or unsubsidized PLUS & student loans $ amount..... THEN we'll supplement the remaining few thousands amount.....This way, it is still considered as "receiving 100% student aid" (we "help" you achieve/reach that 100% coverage, but it isn't 100% from our endowment).
pioneering portfolio management is a really good book for anyone wanting a better insight into how endowments are managed
This story goes even further that all that was covered in this story. One almost hidden problem withen this issue is in how much of our taxes are paid into some of our countries universities research programs. Basically, a handful of these government sponsored research programs are done for pharmaceuticals. Which is a good thing for us, you'd think. These pharmaceutical companies give their medicines to be tested for FREE to these University Research programs. Which again, the costs for their research is covered by OUR TAX dollars. With the idea that we would than see a return from our investments, in the form of the total costs for those prescriptions (whether it was to be paid out of pocket or through insurance) to be significantly lowered.
These universities have people donate to them on the belief that they are contributing to help in fundings for these kind of research programs.
They also churn out papers on finance, securities markets, regulations, antitrust… which provide academic justification for the laws and policies that uphold hard capitalism :/ I would have liked this investigation delve deeper into the intellectual conflict of interest that these donations and investments subject colleges to.
Tax deductions don't make you SAVE money
Pedro Pedrito If you can deduct more off your taxes and pay LESS THAN you would have you have IN FACT saved money!
@@Frost517 I don't think I understand could you do an example for me?
If I make 100 and pay 30% to taxes then I have 70 at the end.
If I deduct 30 because I gave it to charity, then I pay 30% of 70, so I end up with 49. So I end up with less, not saving anything.