Harvard/Griffin: skewed distribution of endowments favours educational elite
Studies show relatively few students of modest means enrol at top US institutions
When it comes to philanthropy, Ken Griffin is not exactly a value investor. The multi-billionaire, who made his fortune as a hedge fund founder and market maker, this week gave $300mn to his alma mater, Harvard University. Overall, Griffin has donated more than $500mn to the Massachusetts-based school.
The gift drew criticism from some students and alumni irked that Griffin has backed political candidates deemed hostile to higher education. A more interesting question is why such a well-endowed institution deserves such generosity when so many other postsecondary institutions are needier.
Harvard Management Company’s portfolio was valued at $51bn last year. It fell by 1.8 per cent in the year to June, after soaring by 34 per cent the year before.
One area where that cash pile is useful is in financial aid. Students from families that earn less than $75,000 annually are not charged to attend Harvard. Still, studies show that relatively few students of modest means enrol at elite US institutions.
The tendency of American private colleges to accumulate and hoard resources has attracted the attention of policymakers. The 2017 Trump tax reform law imposed a 1.4 per cent tax on investment income for colleges where the average endowment per student exceeded $500,000.
Public universities, where the majority of American students end up, are still feeling the pinch of post-2008 austerity. US states on average spent 13 per cent less on students in 2018 relative to 2008. That leaves them paying far higher tuition fees than previous generations, according to the Center on Budget and Policy Priorities.
Griffin could look to another prominent philanthropist, MacKenzie Scott, the former wife of Jeff Bezos, as a role model. Scott has been rapidly giving her portion of the Amazon fortune away. Recipients include modestly-resourced schools. They could otherwise only dream of amassing an endowment large enough to pay taxes.