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by andmis 3746 days ago
Is it just me or does the article fail to mention/estimate/discuss how much money the universities received _from_ hedge funds? It repeats over and over again how much the schools _paid_ in managers' fees, but if the return was several times that amount, then I guess I don't see the problem.
2 comments
SilasX 3746 days ago
If they did show that data, it would look worse. On average, universities don't outperform (far lower-cost) index funds with similar objectives, per the recent HN story:

https://news.ycombinator.com/item?id=11202349

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mishchea 3746 days ago
The article focuses on universities' investments in hedge funds specifically. The numbers in the article suggest that on the high end, about 10–20% of an endowment will be in a hedge fund.

The question I have is, what are the typical returns just on that 10–20% investment?

The endowment can do poorly (as bad as or worse than an index fund) as a whole, even if the investment into hedge funds is paying out well.

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hkmurakami 3745 days ago
Any discussions of returns must necessarily consider the risk incurred to achieve that return.
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SilasX 3745 days ago
Sure, but (by most metrics) hedge funds are going to be riskier/more volatile and you have to lock up your money for longer. So the same return would count as worse performance if placed in hedge fund (and that's not even accounting for differences in expenses yet).
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beeboop 3745 days ago
Hedge funds as a group are only risky and volatile compared to mutual funds. Their degree of riskiness varies tremendously, and there are a great number of them that would offering investment management that is tremendously less risky than an index fund.
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Cacti 3745 days ago
The argument is that, with few exceptions, anyone operating at this size is basically going to hit average market returns. A couple of these Universities seem to have particularly gifted investment managers, but, even there it's debatable.

It's the same old story everywhere: Do you stick the money in a 0.2% fee index fund and ride the wave, or do you spend 20% of your returns on fees in the hope you're going to get lucky?

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