People who want to buy their kids Harvard admission just do it directly: you give Harvard $X million and the admissions office accepts your kid (usually).
Think a bit: what kind of a useful advice can one give to managers of a $36 billion fund? That some company is about to be taken over? They don’t care. There is not enough liquidity in the market for them to buy enough of the target stock to move their needle.
Very large funds are peculiar creatures: their freedom of action is severely constrained by their size and their investment choices largely boil down to slow drifts in asset class allocations.
Oh, and the characterization of Harvard (all Ivies, actually) as an investment business with a very minor sideline in higher education is common and even, ahem, traditional :-)
My knowledge of high finance is theoretical so this might be wrong but is $36 billion really that much compared to the size of the world’s financial markets Harvard gets to play in? Yes, knowledge of one takeover wouldn’t allow them to double their endowment, but knowledge of, say, ten material non-public events a year could let Harvard earn a significant above market return.
is $36 billion really that much compared to the size of the world’s financial markets
The whole market, not much, so if a fund of that size wants to shift its asset class allocaton and, say, sell a few billions of bonds and buy a variety of global equity instead, it can do this. But if, instead, it wants to buy a particular security, it can’t buy much relative to its own size. Liquidity constraints are very real at this size.
$1m profit is less than 1⁄3 of a basis point of return for a $36B fund. It’s just not worth the bother, especially given how insider trading is illegal in the US.
That some company is about to be taken over? They don’t care.
But by this reasoning, they also do not care about a $5M cash gift to get someone off the waitlist. If I know that my company is going to put in an offer for another company at 20% above the current trading price, that info is worth $5M if you have and can move $25M without raising any concerns. If anything, the larger a fund, the easier is it to make adjustments like that to take advantage of insider info without it appearing suspicious. (“Yeah, we bought $25M of that stock the day before the buyout offer was announced, but it was as part of $700M of rebalancing, because we like to adjust 2% of our total portfolio every month.”)
But by this reasoning, they also do not care about a $5M cash gift to get someone off the waitlist.
Correct. The endowment managers absolutely don’t care about a $5m cash gift. It’s the admissions office which cares because it’s a part of that minor side line in higher education and doesn’t have free access to all those billions.
that info is worth $5M
Assuming an average return somewhere in the 8-10% area, the endowment generates each year $3-3.5 billion. Why risk an SEC investigation, a potential prosecution, a hit to reputation, etc. for a mere $5m which is about the rounding error in financial statements?
In general, I would recommend learning to distinguish between reality and caricatures drawn by enemies. It would seem to be… rational :-)
Because the SEC wouldn’t dare go after Harvard. And even if some prosecutor at the SEC who didn’t get the memo decided to start something, it would get covered up. The issue is that Harvard has more moral authority then the SEC.
I bet it is not.
People who want to buy their kids Harvard admission just do it directly: you give Harvard $X million and the admissions office accepts your kid (usually).
Think a bit: what kind of a useful advice can one give to managers of a $36 billion fund? That some company is about to be taken over? They don’t care. There is not enough liquidity in the market for them to buy enough of the target stock to move their needle.
Very large funds are peculiar creatures: their freedom of action is severely constrained by their size and their investment choices largely boil down to slow drifts in asset class allocations.
Oh, and the characterization of Harvard (all Ivies, actually) as an investment business with a very minor sideline in higher education is common and even, ahem, traditional :-)
My knowledge of high finance is theoretical so this might be wrong but is $36 billion really that much compared to the size of the world’s financial markets Harvard gets to play in? Yes, knowledge of one takeover wouldn’t allow them to double their endowment, but knowledge of, say, ten material non-public events a year could let Harvard earn a significant above market return.
The whole market, not much, so if a fund of that size wants to shift its asset class allocaton and, say, sell a few billions of bonds and buy a variety of global equity instead, it can do this. But if, instead, it wants to buy a particular security, it can’t buy much relative to its own size. Liquidity constraints are very real at this size.
$1m profit is less than 1⁄3 of a basis point of return for a $36B fund. It’s just not worth the bother, especially given how insider trading is illegal in the US.
And the need for coordination between the admission office and the endowment manager that might leave a paper trial.
But by this reasoning, they also do not care about a $5M cash gift to get someone off the waitlist. If I know that my company is going to put in an offer for another company at 20% above the current trading price, that info is worth $5M if you have and can move $25M without raising any concerns. If anything, the larger a fund, the easier is it to make adjustments like that to take advantage of insider info without it appearing suspicious. (“Yeah, we bought $25M of that stock the day before the buyout offer was announced, but it was as part of $700M of rebalancing, because we like to adjust 2% of our total portfolio every month.”)
Correct. The endowment managers absolutely don’t care about a $5m cash gift. It’s the admissions office which cares because it’s a part of that minor side line in higher education and doesn’t have free access to all those billions.
Assuming an average return somewhere in the 8-10% area, the endowment generates each year $3-3.5 billion. Why risk an SEC investigation, a potential prosecution, a hit to reputation, etc. for a mere $5m which is about the rounding error in financial statements?
In general, I would recommend learning to distinguish between reality and caricatures drawn by enemies. It would seem to be… rational :-)
Because the SEC wouldn’t dare go after Harvard. And even if some prosecutor at the SEC who didn’t get the memo decided to start something, it would get covered up. The issue is that Harvard has more moral authority then the SEC.
And on which basis do make such a confident pronouncement?