Cooper Union Learns An Expensive Lesson About Hedge Funds

The New York Times has a story highlighting what can happen when well-intentioned but financially unsophisticated trustees of a college endowment interact with the wrong kind of financial advisors. It’s a sorry tale of poor portfolio construction and imprudent debt capped off with a Hail Mary type lunge for hedge funds that it was hoped would solve their problems with 10% returns. Regrettably, a desired return is no substitute for a realistic expectation of one, and the consequences are now being felt widely within the school. Where are the consultants today who advised Cooper Union to expect a 10% return from hedge funds? They’re probably investing the fees they earned in something more reliable – perhaps even back in to their consulting business.

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