What's with college endowments' negative 2 percent rate of return in 2016 -- while the Dow Jones industrial average rose more than 13 percent? Two words: hedge funds.
Over the last few decades, colleges and universities have shifted a growing share of their endowment assets to hedge funds, alternative investment funds that use high-risk methods in hopes of achieving large capital gains. Hedge funds charge high fees even when they lose money, which is why each of the top five U.S. hedge-fund managers took home more than $1 billion in 2015 despite uneven performance. That same year, most colleges were invested in hedge funds, as was more than $100 billion (20 percent) of all college-endowment assets. While some people point to Obama-era financial regulations for poor hedge-fund performance, others believe performance may remain volatile even if President Trump rolls back these regulations.
Chronicle of Higher Education (02/20/17)
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