“The joke about Harvard is that it’s a hedge fund with a university attached to it,” Mark Schneider tells me. It’s a quip that, for obvious reasons, has become pretty popular in recent years. In 2014, the university’s legendary endowment, overseen by a team of in-house experts and spread across a mind-bending array of investments that range from stocks and bonds to California wine vineyards, hit $36.4 billion. “They’re just collecting tons, and tons, and tons of money,” says Schneider, a former Department of Education official who is currently a fellow at the American Institutes for Research.
Of course, normal hedge funds have to pay taxes on their earnings. Because it’s a nonprofit, Harvard doesn’t. And since bestowing tax exemptions is the same as spending cash from the government’s perspective (budgeteers call them “tax expenditures” for a reason), that means the American public effectively subsidizes Harvard’s moneymaking engine. The same goes for Stanford (endowment: $21.4 billion), Princeton (endowment: $21 billion), Yale (endowment $23.9 billion), and the country’s other elite institutions of higher education.