The partnership between hedge funds and university and college endowments continues to grow. For many educational institutions, hedge funds are an important tool used to diversify their portfolios, manage risk and produce reliable returns. Hedge fund investments help these institutions fund financial aid, scholarships, operations, research, academics and athletic programs.

1. Hedge Funds and
Universities
Managed Funds Association | February 2014

2. Overview
Hedge funds originated as an investment vehicle to help diversify portfolios,
manage risk, and produce reliable returns over time. While hedge funds’
investor base has evolved though the years – from individuals to institutions
such as pension plans, universities, and foundations – their core goals have
not.
Institutions face mounting challenges toward meeting their financial
obligations and abilities. Hedge fund investments help these institutions fund
scholarships, financial aid, research and athletics.
Institutional investors have shifted investment strategies in recent years to
alternative investments - including hedge funds- which have helped place
institutions on firmer ground over the long-term. This presentation details the
growing partnerships between hedge funds and university and college
endowments.
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3. 1
Hedge Funds and Universities
Hedge funds’ investor base has evolved significantly over the years, with 66%
of assets under management currently coming from institutional investors such
as pensions, endowments, and foundations.*
Many institutions are currently working to cope with major demographic and
fiscal challenges, including funding shortfalls for things like financial aid,
research, athletics and other programs. As a result, institutions are increasingly
seeking ways to diversify their investment portfolios to produce reliable returns.
FACT: 66% of hedge fund
assets are held by
institutional investors.
*Source: 2014 Preqin Global Hedge Fund Report.
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4. 2
Hedge Funds and Universities
Hedge fund investments help these
institutions fund:
• Financial aid and scholarships at colleges
and universities
• Research and Clinical Trials
• Athletics
• Expansion and operations at universities
campuses
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5. 3
Universities and College Endowments
Invest in Hedge Funds
University and college endowments were among the first institutions to
partner with hedge funds in the early 1990’s, and this relationship has
strengthened in recent years.
A recent study estimated that a modest
allocation to hedge funds could improve
returns of U.S. college and university
endowments by approximately $1.73 billion
annually.*
Endowments investing in hedge funds include:
*Source: The Changing Role of Hedge Funds in the Global Economy, Everett Ehrlich, pp. 1 (September, 2011)
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6. 4
Universities Are Increasing Their
Investments in Alternatives
According to recent data from the National Association of College and
University Business Officers (NACUBO), endowments have steadily increased
investment allocations to alternative investments, including hedge funds, over
the last 10 years.
University Asset Allocations to
Alternatives/Hedge Funds
Source: Alternatives Reality: What to Expect From Future Allocations, January
2014 (Commonfund Institute)
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7. 5
Summary
The partnership between hedge funds and university and college endowments
continues to grow. For many educational institutions, hedge funds are an
important tool used to diversify their portfolios, manage risk and produce
reliable returns. Hedge fund investments help these institutions fund financial
aid, scholarships, operations, research, academics and athletic programs.
Hedge funds are not a silver bullet, but they are increasingly part of a
comprehensive and responsible approach toward meeting financial obligations.
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8. 6
Hedge Funds Investor Map
To learn more about how hedge funds help university and college endowments
fund scholarships and research for students in your state, click here.
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