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August 19, 2015

Opinion: Fund Managers Win Big in College Endowment Gains

Growing university endowments have benefited financial managers far more than students, paying out hundreds of millions of dollars a year in compensation and fees, a law professor writes in a New York Times column proposing minimum-spend requirements for colleges' investment funds.

Elite schools that are "heaving with cash" dole out several times more money to the fund managers who look after their investments than is earmarked for tuition assistance, fellowships, and other direct student aid, the University of San Diego's Victor Fleischer says, citing a review of tax and financial data from Yale, Harvard, Stanford, Princeton, and the University of Texas.

Mr. Fleischer calls on Congress, as part of the expected reauthorization this year of the Higher Education Act, to require universities with endowments exceeding $100 million to spend at least 8 percent of their holdings each year, a figure he says would maintain endowment growth but curb cash hoards that primarily benefit fund managers.