The Trump administration’s assault on “woke” universities is not only squeezing the budgets of some of the nation’s elite schools, but also threatening private equity firms and hedge funds, On The Money has learned.
That’s right – Wall Street fat cats are predicting a huge hit to their business if Trump carries out his proposed punishments for these institutions of leftist higher learning – from removing their non-profit status to ending federal subsidies going to places like Harvard, sources said.
The administration has also proposed imposing new and significant taxes on the colleges’ endowments, as On The Money previously reported.
As Team Trump ramps up the pressure, colleges will need quick and sometimes immediate access to cash in their endowments. Currently, much of the money is locked up in private equity investments – pools of cash invested in private companies that earn a return when they IPO; and hedge funds – sophisticated trading shops that promise outsized returns and charge high fees.
But both of these businesses demand patience on the part of the investor. Universities seek an 8% return over time from their PE and hedge fund holdings. If Trump has his way, the endowments will be forced to place cash in more liquid vehicles like so-called passive index funds – investments that don’t need an active manager and don’t charge exorbitant fees.
“Our fund may be doomed,” said one hedge fund manager who works with university endowments. “All these college CIOs (chief investment officers) will think they’re OK in a passive fund.”
Around two-thirds of all college endowments have exposure to so-called alternative investments – PE, hedge funds and venture capital – because they have traditionally outperformed market indices over time. Harvard has the largest endowment at over $50 billion in assets and has around 40% of its money in PE, and another 32% of it is managed by hedge funds.
Wall Street executives told On The Money that PE might be less impacted than hedge funds, because such money is locked up for a number of years and it’s difficult to sell positions given the limited number of buyers for stakes. Nevertheless, some colleges like Harvard, Yale and Princeton have been eyeing selling PE stakes, Wall Street executives say.
Trump further ramped up his pressure on elite colleges’ budgets earlier this week when he ordered the State Department to stop processing student visas. Foreign students often attend schools like Harvard, which charges close to $100,000 a year in tuition and living expenses, and they pay the full amount as opposed to seeking scholarships.
Congress, meanwhile, is looking to increase its excise tax on endowment returns to 21% from the current paltry rate of 1.4%. The hike would be lower than past proposals but still significant enough to squeeze budgets further.
The Trump administration believes that as it clamps down on endowments, elite schools will embrace a more centrist approach to higher education, which for decades has been dominated by left-wing professors and administrators. The far-left ideology was exposed most blatantly since the Oct. 7 massacre of innocent Israelis by Hamas terrorists that sparked wild celebrations at many elite schools that went unaddressed by college officials.
Harvard has sued the White House to restore its federal funding on the grounds that the White House is improperly meddling in its affairs. Team Trump is withholding on the grounds that the school didn’t protect Jewish students during the protests.
Trump himself has called Harvard a “very antisemitic school,” which unfortunately means he’s just getting started in making its financial life miserable.
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