[AnthonyMouse]

> And you've even noted that the IRS required distribution is often much lower than the actual investment income earned. What does this mean? It means even after making the qualified distributions the endowment grows.

Not in real terms it doesn't. When was the last time typical moderate risk investments had long-term returns more than 5% above inflation?

If you had $1000 1970 dollars in 1970 and it increased by nominal 3% annually until last year, you would have $4012 in 2017 dollars. That isn't a real >$3000 gain, it's a >$2400 loss (in 2017 dollars), because $1000 1970 dollars is $6418 2017 dollars.

> When did college tuition start skyrocketing? The mid-1970's.

This is also just after the Higher Education Act was passed, giving out low interest student loans.

[elliekelly]

> Not in real terms it doesn't. When was the last time typical moderate risk investments had long-term returns more than 5% above inflation?

The asset allocation for a $100MM+ endowment FBO educational institution typically includes about 10% PE, 5% VC, and 20-25% in alts (hedge funds, derivatives, long/short plays, etc). These aren't even close to "typical moderate risk" investment vehicles.

And the bigger the endowment, the bigger the percent allocation to those types of investments. For example, a super endowment like Harvard probably has closer to 50% of the portfolio in alternative strategies.

[AnthonyMouse]

> These aren't even close to "typical moderate risk" investment vehicles.

In terms of average long-term returns they are, if not worse. Major index ETFs have a very inconvenient tendency to edge out actively managed funds as a general rule, and university endowments are no exception.