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Private Equity Fees Paid by Universities Deserve Examination

Some financial professionals reacted to my Aug. 19 Op-Ed article on private equity fees and university endowments by emphasizing that superior performance justifies superior fees.

Fair enough. The essay focused on the spending side of the equation. Even if the high fees are justified, universities can and should do more to advance the charitable mission.

But given the interest, the fees are worth a closer examination. High fees are probably worth it at Harvard, Yale, Stanford, Princeton and other elite endowments that can access the top quartile of private equity and venture capital funds. At that level, the industry standard two-and-twenty arrangement (2 percent of assets under management and 20 percent of profits in fees) is a relative bargain.