Although tuition, donations, and research all bring in revenue, many colleges and universities generate additional, and in some cases substantial, funds from managing their endowment funds. Although endowments are typically restricted – the university cannot simply decide to spend all of the endowment in a single year – prudent management would preserve funds for the future even if there were no restrictions whatsoever, and so the management of endowment wealth remains a material piece of the mosaic of university finance: the pursuit of revenue and mission.

Endowment size varies tremendously in higher education. The wealthiest schools are large even by the standards of the business world: Harvard's $34.6 billion endowment in 2007 is comparable to the market value of Burlington Northern (ranked 110 in the S&P 500), Aetna (ranked 119), or Colgate-Palmolive (ranked 72). Even the eighteenth largest endowment in 2007, Cornell University, exceeded $5 billion, a requirement for listing in the S&P 500 and on par with the market value of Aramark (Forbes.com 2006). The schools with the largest endowments are the ones that everyone recognizes – and not coincidentally. Large endowments are both a driver and a reflection of university growth and prestige.

These wealthy schools are rare, however. The vast majority of schools have endowments that are measured in tens of millions or less, not in billions. And schools with large endowments invest them very differently than do schools with small endowments, generating systematically different rates of return.