Oil Could Make Texas University the Richest in America Ahead of Harvard.
The symbol of the return to the forefront of fossil fuels.
Founded on October 8, 1636, the oldest American university, Harvard, is also the richest. It could be dethroned by its counterpart in Texas because it has vast oil fields. Its reserves are estimated at 1.7 billion barrels, or $153 billion at current prices, according to Bloomberg. Every day, at least $6 million goes to the University of Texas, which in part benefits its fund that contributes to the university budget. In the summer of 2021, Harvard's fund ($53.2 billion) was still the richest in the United States and the world. The University of Texas fund ($42.9 billion) had already overtaken Yale's ($42.3 billion) to take second place. It is now aiming to become number one in 2023, which would be revenge on the East Coast university elite.
99 years ago, the University of Texas received its first check for $516.63 from an oil company. Its state had granted it a 2.1 million hectare area. Prospectors must pay royalties. With the oil boom, the university found itself in a gold mine. It has reaffirmed that there is no question of giving up fossil fuels, unlike Harvard. Its “university sovereign wealth fund,” which is responsible for contributing to the university's budget, benefits from these regular inflows of money. They are invested in the markets. Part of the oil windfall is also used for investments by the University of Texas, which manages eight universities, the largest of which is Austin.
Harvard does not have this extra cash and its investments are suffering in the current environment. Last year, its fund was heavily exposed to private equity and hedge funds for two-thirds of its capital, and 14% to equities. Defensive asset classes (real estate, inflation-linked bonds, cash) in the current environment accounted for only 17% of its assets.
High risk taking on the East Coast
Unless the fund anticipated the crisis very well, it must have suffered a significant drop in the capital this year. For its 2021 fiscal year (June 2020-June 2021), it had one of its best years with a 34% return. However, it had warned in its annual report that it would be extremely difficult to repeat that feat. Last year, the Harvard Fund contributed 39% ($2 billion) to the university's budget, twice as much as the students (17%).
The major East Coast universities are following the model of Yale, which launched a fund in 1985. The fund invests the majority of its capital in alternative assets to stocks and bonds, such as real estate, private equity, hedge funds, etc. This high level of risk-taking (illiquidity of investments) generates significant costs - commissions for the managers chosen, the cost of selecting and monitoring the funds - and great complexity. Some universities invest in the funds of their alumni.
Over the past 20 years, the University of Pennsylvania has had the largest growth in fund capital (365%), followed by Yale and Brown (209%), according to Edsmart. Harvard ranks 7th and has more than doubled its capital in 20 years. Its fund had plunged 27.3 percent because of the great financial crisis of 2008.
Some reading
Putin’s 5 Major Geopolitical Mistakes With His War in Ukraine. Mistakes that will lead Putin to his downfall once the war in Ukraine is lost by Russia.
4 Billion People by 2100 — The World’s Population Could Be Cut in Half by the End of the Century. This is at least the thesis supported by James Pomeroy, an economist at HSBC.
8 Security Tips To Better Protect Your Bitcoin. Take responsibility for protecting what you own in Bitcoin.
Rather Than the End of Abundance, It Is Sustainable Abundance That We Must Aim for. Emmanuel Macron is wrong.
Elon Musk’s Big Lie About the Hyperloop Has Just Been Exposed. His only objective would have been to sabotage a Californian high-speed rail project.
This Is the Book to Read If You Want to Discover the True Face of the Kremlin Dictator Vladimir Putin. Catherine Belton’s book will help you understand why the West must support Ukraine at all costs.
If you plan to become a paid member of Medium in the future or subscribe to Quora’s paid Quora+ offering, feel free to use my affiliate links below:
This will help support my work while giving you access to more content to expand your knowledge on various subjects.