Saturday, December 15, 2007

Ivy Plus - are they responsibly investing returns?

Last week, I heard a very interesting talk by Antoinette Schoar, an MIT finance professor about how a bottoms up approach to private equity asset allocation has supercharged Ivy plus (Ivy League schools plus MIT and Stanford). This was a pretty interesting talk, and at some point, it may merit its own discussion.

I have some personal qualms about how schools are investing this money. For instance, at MIT, the Stata Center is a folly of ostentation. While it's beautiful, it was very expensive, and it innumerable problems resulting from shoddy design and complex construction. Princeton is investing in a showpiece dorm (Whitman). Schools like CalTech and my undergraduate alma mater, Swarthmore) are implementing a new program which enhances tuition packages to the upper middle class.

Meanwhile, the gulf between the rich schools and everyone else is growing greater. That increases the responsibility of the wealthy ones to invest it their returns responsibly. It follows that it becomes a question of what they believe is responsible. In general, my opinion financial aid should go to research and increase access of education to those who need it, minority, the poor, leadership in non-profit and developing nations, for instance. It's more dubious as to whether a supercharged dorm or post-modern art rendition of a student center is a useful way to spend that.

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