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Illustration: Shoshana Gordon/Axios

College and university endowments are surging, thanks in large part to investments in venture capital and private equity.

Why it matters: Rich schools, which have elevated access to private alternatives, are getting richer.

Driving the news: Harvard University on Thursday reported that the size of its endowment grew 27% in fiscal 2021, to a market-leading $53.2 billion, while its investment return was 34%. The biggest driver was private equity (inclusive of VC), with a whopping 77% return on investment.

  • Harvard's second-strongest asset class was public equity with a 50% return. Then there's a steep drop to hedge funds (16%) and real estate (13%).
  • Private equity's value boost caused it to leapfrog public equities in terms of Harvard's portfolio allocation (34% vs 33%).
  • Harvard also said its endowment distributed more than $2 billion toward the school's operating budget, which represent more than one-third of annual revenue.

This isn't just about Harvard (unless you went there, in which case it's always just about Harvard).

  • Overall, university endowments are posting their best returns since the mid-1980s.
  • Yale, the second-largest endowment, yesterday announced a 40.2% return. It didn't break out returns by asset class, but it has 23.5% exposure to VC, 17.5% to private equity and just 2.25% to public equity.
  • MIT, the country's sixth-largest university endowment, disclosed a 55.5% return on investment. Penn, which is seventh-largest, hit 41%.

Big picture: In many cases, this is validation of the so-called "endowment model" championed by the late David Swensen of Yale, which over-allocates to illiquid securities.

  • Harvard's Narv Narvekar has been described as a Swensen acolyte, although Harvard said its returns trailed some Ivy League peers because it took less risk.
  • Caveat: This comes after many years of net VC and PE returns getting bested by public equity indexes. In other words, fiscal 2021 is the endowment model winning a battle, not yet winning the war.

Look ahead: Expect lots of schools with low alternatives exposure to speed up their chase. It's what happened in 1998–2000, often with poor results as new entrants got stuck with middling managers (particularly faded brands).

  • There also could be denominator effects if paper returns recede.
  • These returns also may embolden those who advocate for changing tax treatments of schools with large endowments.

Go deeper: College costs have soared, but income to pay for them hasn't

Go deeper

Americans are super-sizing their holiday travel

Illustration: Sarah Grillo/Axios

Americans are rushing back into holiday travel, and many are taking even longer trips now than they did before the pandemic began.

The big picture: After skipping Thanksgiving and Christmas gatherings last year, many people are eager to maximize this year's celebrations with friends and family. And flexible remote working arrangements make that easier than ever.

Updated 16 hours ago - Sports

The potential GOAT of chess faces intriguing challenger

Illustration: Sarah Grillo/Axios

The World Chess Championship between Norway's Magnus Carlsen and Russia's Ian Nepomniachtchi began on Friday, 1,094 days after Carlsen won his fourth consecutive title.

Why it matters: During the long, COVID-fueled layoff, chess entered a new era, and with the championship finally here, the age-old game is ready for its close-up.

Department of Interior proposes raising cost of drilling on public lands

A horizontal drilling rig and a pump jack sit on federal land in Lea County, New Mexico. Photo: Callaghan O'Hare/Bloomberg via Getty Images

Oil and gas companies should pay more to drill on federal lands and waters, the Department of the Interior argued in a report released Friday, saying that the current rates were "outdated."

Driving the news: The Department of Interior report said that the federal government's oil and gas leasing and permitting program "fails to provide a fair return to taxpayers, even before factoring in the resulting climate-related costs that must be borne by taxpayers."