How Does Human Capital Affect Investing? Evidence from University Endowments

Matteo Binfarè, Gregory Brown, Robert Harris and Christian Lundblad

Review of Finance, 2023, vol. 27, issue 1, 143-188

Abstract: We examine the links between human capital and endowment investing. Harnessing detailed information on university endowments, we find that higher asset allocations to alternative assets accompany higher levels of human capital in the endowment’s investment process. Moreover, high levels of human capital are linked to larger returns, even on a risk-adjusted basis. The improved investment outcomes arise because endowments (i) capture higher returns that can accompany alternative assets, (ii) select or have access to high performing managers, and (iii) minimize fees by accessing funds directly rather than through funds of funds. Our measures of human capital include expertise in alternatives on governing bodies, the presence of a chief investment officer, and the size of the investment staff. Finally, we conduct a novel survey of endowments and confirm that human capital is central in facilitating alternative investments.

Keywords: Endowments; Human capital; Private equity; Returns; Venture capital (search for similar items in EconPapers)
JEL-codes: G11 G23 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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