Growing wealth disparity has produced a new financial hyper-elite who make eight-figure donations to major universities, who hand that money back over to more finance titans in the form of special commissions that are taxed at a ridiculously low rate (making more zillionaire donors).
It's true that the best performing giga-endowments are well-invested and grow at an incredible rate (Piketty's analysis of the $80B+ Harvard endowment in Capital in the 21st Cenutry is excellent on this), but you really couldn't ask for a more perfect metaphor for a financialized, winner-take-all economy: universities amassing tax-free pots of unimaginable wealth, paying hundreds of millions to hedge fund managers who pay almost no tax on the payments, creating an education system that can only be used by middle-class children who assume a lifetime of crippling debt, or the children of hedge-fund managers, who pay cash and walk out debt-free and ready to begin the cycle anew.
Last year, Yale paid about $480 million to private equity fund managers as compensation — about $137 million in annual management fees, and another $343 million in performance fees, also known as carried interest — to manage about $8 billion, one-third of Yale’s endowment.
In contrast, of the $1 billion the endowment contributed to the university’s operating budget, only $170 million was earmarked for tuition assistance, fellowships and prizes. Private equity fund managers also received more than students at four other endowments I researched: Harvard, the University of Texas, Stanford and Princeton.
Stop Universities From Hoarding Money [Victor Fleischer/NYT]