It’s academic

Academic politics are vicious because the stakes are so small, as Henry Kissinger is reputed to have observed. But the stakes aren’t always so small in academia, even if the politics remain dicey enough to require the deft touch of a seasoned diplomat.

Such appears to be the case anyway at England’s elite universities, Oxford and Cambridge. Their achievement over the centuries in producing brilliant graduates is simply extraordinary, but when it comes to managing their own money, their traditional conservatism has produced rather more mundane results — certainly in comparison with more adventurous U.S. rivals like Harvard University and Yale University. Over the past decade Cambridge’s endowment has yielded average annual returns of 8.6 percent, while Oxford has managed just 6.7 percent. Harvard and Yale have consistently recorded gains above 15 percent.

This performance gap reflects in part the negative effect on the British schools of restrictions, no longer in force, that limited them to investing in income-producing holdings. Their U.S. brethren, by contrast, were free to wholeheartedly embrace higher-returning investments like hedge funds.

But the U.K. institutions must also overcome cultural restraints. Their endowments are not centralized; instead, they are spread out among their famously independent colleges. The central administrations of the Oxbridge schools would like to change that — making investing more efficient and rewarding. However, as Senior Editor Loch Adamson points out in “The Americanization of Oxford and Cambridge” (page 59), getting the colleges to go along is no easy matter.

What’s at stake, of course, is far more than performance envy. Though the U.K. schools are subsidized by the government, the difference between their returns and those of the U.S. universities adds up to tens of millions of dollars annually, and that, presumably, translates into performance of another sort: academic excellence. No one knows this better, perhaps, than Alison Richard, vice chancellor of Cambridge, who tells Adamson: “I didn’t come back to Cambridge to preside over a slow slide into something less than a world-class university.”

— Michael Carroll

Editor