Billionaire donors have warped the university’s priorities from providing an effective education to steering profit-generating ventures.

The most cutting jokes are the ones with a bit of truth behind them. While the increasingly popular quip that “colleges are just real-estate hedge funds with classes attached” may inspire eye rolls, recent moves are making the joke cut deeper. 

In January, the University of California system — one of the largest public-university systems in the world and where I teach — made a $4 billion investment in the Blackstone Real Estate Income Trust fund, one of the world’s largest real-estate funds. The massive investment came just weeks after the fund, known as BREIT, came under fire for limiting how much investors could pull out of it. But these liquidity concerns didn’t scare off UC, which committed to keep its investment with BREIT for at least six years.

And the University of California system isn’t alone in its ambitions — universities across the country have invested in or bought up real estate. And some large public universities such as Georgia Tech, the University of Washington, and the University of Texas at Austin have even teamed up with private developers to build “innovation districts,” hubs of office buildings and retail shops that are leased to private companies instead of being used for classes or student housing, on university property. 

While the money flowing from higher education to real estate has intensified in recent years, universities have been looking to private equity and real-estate investments since the 1980s to fund their operations. And increasingly, this financialization of higher education has warped the purpose and mission of universities. Billionaire donors and money managers have shifted the focus of these institutions from providing students an effective education to sustaining a profit-generating, investor-enriching machine. 

How private equity ended up in universities

In addition to tuition and money from the government, universities are funded by endowments — tax-free donations typically from alumni that are invested in order to grow over time. Instead of using an endowed gift immediately, the school will invest the funds in a variety of assets — stocks, bonds, etc. — and then use the gains made on those investments as a source of revenue. In theory, endowments help provide a continuous stream of funds to pay a university’s ongoing costs that isn’t dependent on political decisions or students’ ability …read more

Source:: Business Insider


How universities became giant piggy banks for hedge-fund billionaires

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