over 3 years ago • 1 min
Years of working hard, playing hard, and practicing esoteric marching band routines have paid off for US colleges’ class of 2020: they’ve graduated with the highest mark in bond sales since 2004 🎓
US colleges have sold $36 billion worth of debt to investors so far this year. While universities around the world have faced pandemic-related uncertainty, even those without students physically returning to campus seem in little hurry to lower their hefty tuition fees 💰 That income stability might be what’s attracted investors to universities’ bonds in their droves – along with the top colleges’ reassuring credit ratings. Harvard bonds due to be repaid in 2050, for instance, are deemed similarly safe to the US government’s – but they also offer inventors a higher yield…
Investor demand for super-secure government and big company bonds has pushed their prices to record highs and their yields – which move inversely – to record lows. That’s spurring some bond investors to take greater risks in the hopes of making more profit 🤷♀️ But for the likes of Samsung Life Insurance Company – South Korea’s biggest life insurer – the rationale for buying into US college debt is more straightforward: Korea’s aging population necessitates more payouts and therefore reliable long-term investment returns to fund them.
For years, university endowment funds – the pools of money that help keep them running – have themselves invested in so-called “alternative” assets deemed too risky for ordinary investors: private equity, for instance 💵 And while that worked well for a while, recent analysis suggests many such funds are now underperforming simple stock and bond portfolios – illustrating that with greater potential reward comes greater risk too.
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