Reading #Piketty (2)

Averages !

Beware of averages as the most interesting stories are hidden in the way the average is composed.

There are 800 Universities in the U.S. who have endowment funding; there are managed by Foundations and publish a very complete set of data and reports.

The average yield for the 800 Universities was around 5%: once again, the historical yield for Capital since the beginning of time. However, when you dissect the data by SIZE of the endowment fund you find a nearly perfect correlation between the size and the yield: Harvard, the largest of such Foundations with almost $30B in its coffers, achieved more than 10%, while the University of Iowa, with a paltry $11.5M had to content itself with around 4%.

So very substantially higher yields are indeed available when Capital has a dimension sufficient to afford the most sophisticate management techniques – which means everybody else’s yield is pushed down to compensate for this as the average stays unchanged.

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