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Secrets of the Academy: The Drivers of University Endowment Success

  • Josh Lerner
  • Antoinette Schoar
  • Jialan Wang

In recent years, university endowments have received much attention for their spectacular returns and innovative investment strategies, but few papers have examined trends in the endowment sector at large. In this paper, we analyze a sample of 1,300 educational endowments between 1992 and 2005. A striking phenomenon emerges of the "rich getting richer", a dramatic widening of the size gap between the largest endowments, led by the Ivy League, and the average endowment. Growth in endowment size has been driven largely by high investment returns, which are in turn related to the quality of the student body and the use of alternative assets. Elite endowments seem to benefit not only from economies of scale in investment management, but genuine skill and expertise in choosing the right investments at the right times.

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File URL: http://www.nber.org/papers/w14341.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14341.

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Date of creation: Sep 2008
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Publication status: published as Josh Lerner & Antoinette Schoar & Jialan Wang, 2008. "Secrets of the Academy: The Drivers of University Endowment Success," Journal of Economic Perspectives, American Economic Association, vol. 22(3), pages 207-22, Summer.
Handle: RePEc:nbr:nberwo:14341
Note: CF
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  1. Kaplan, Steve & Schoar, Antoinette, 2004. "Private Equity Performance: Returns, Persistence and Capital Flows," Working papers 4446-03, Massachusetts Institute of Technology (MIT), Sloan School of Management.
  2. Josh Lerner & Antoinette Schoar & Wan Wong, 2005. "Smart Institutions, Foolish Choices? The Limited Partner Performance Puzzle," NBER Working Papers 11136, National Bureau of Economic Research, Inc.
  3. Alexander Ljungqvist & Matthew Richardson & Daniel Wolfenzon, 2008. "The Investment Behavior of Buyout Funds: Theory and Evidence," NBER Working Papers 14180, National Bureau of Economic Research, Inc.
  4. Gompers, Paul & Lerner, Josh, 2000. "Money chasing deals? The impact of fund inflows on private equity valuation," Journal of Financial Economics, Elsevier, vol. 55(2), pages 281-325, February.
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