Note: The guide below was built by one of Roosevelt's partners on our Financialization report, Hedge Clippers.
The typical university endowment has at least 20 percent of its fund invested in hedge funds—largely unregulated, high-cost investment vehicles run by the ultra-wealthy. Hedge funds have done a great deal to endanger endowments and weaken higher education in the United States: they charge astronomically high fees, while delivering poor returns, and engaging in dangerous practices that increase the personal wealth of hedge fund managers while making college more expensive and four-year degrees less attainable for all but the very rich.
A hedge fund is a lightly-regulated investment pool that is usually defined by its exemption from registration under two of the major investor protection laws—the Securities Act of 1933 and the Investment Act of 1940.1 Hedge funds are exempt from these regulations because they are supposed to be investment vehicles for “sophisticated investors” only, e.g. institutional investors (pension plans, endowments and foundations) and the very wealthy.
Hedge funds employ a number of strategies to make money, including using complex algorithms to take advantage of minute gaps in the market, betting against or in favor of certain stocks, and “event-driven” strategies such as betting against currencies. In essence, a hedge fund is defined less by the type of investment it makes and more by its lack of regulation and the high fees it charges.
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How is your university impacted by hedge funds? The following list provides questions to ask to begin exposing the ties between hedge funds and your institution. (Sources to consult to begin your search are noted in parentheses).
How have hedge fund investments impacted my school’s endowment?
Please reference the Hedge Funds and Endowments tool kit attached in the Files section of this site as the primary resource for finding Hedge fund involvement at your school.