🎙️ Finance 101

[5 minutes to read] Plus: Inside Boston's budget shortfall

By Matthew Gutierrez and Shawn O’Malley

Folks, Bitcoin is on another heater. It’s hard to ignore an asset up 18% in 2024 after a ~160% gain last year. Now, it’s sitting back above the $50,000 per token mark.

🔥 The digital asset regained the $1 trillion market cap after a tumultuous 2022.

What does this year have in store?

Matthew & Shawn

Here’s today’s rundown:

Today, we'll discuss the three biggest stories in markets:

  • The small endowment beating the Ivy League

  • Boston’s office problem

  • Investors opt for ex-China ETFs

All this, and more, in just 5 minutes to read.


Which university has the largest endowment in the world? (The answer is at the bottom of this newsletter!)

Chart of the Day

In The News

👨‍🎓 The Small University Endowment Beating the Ivy League

Baylor University in Waco, Texas

Baylor University is a private, Christian university about 95 miles south of Dallas, with strong athletic programs. But now, it’s getting known for its stellar endowment performance. 

Finance 101: Most universities stick to a buy-and-hold approach with their money, adjusting periodically. Not Baylor, whose endowment fund is run by a former trader who pounces on big market moves to boost or cut exposure. 

  • “The only thing I’m doing is what the market tells me to do: If the market goes up, we take some money back. If the market goes down, we give it money,” said the school’s investment chief. “It is finance 101.”

  • Baylor is not only doing well — the school is beating the big boys in the Ivy League. Baylor has beaten the Ivies over the past five years, even though they have much larger investment teams.

  • Baylor’s staff is small: Just the investment chief, a former hedge fund trader, and four staffers, all women. 

Nice returns: Baylor’s endowment grew 6.4% last year, beating all the Ivies. Its 10.9% annualized return beat all Ivies except Brown, which posted a 13.3% return. 

  • Baylor often benefits from timely investments in volatile sectors such as energy and biotech. 

Stay focused: In August 2020, Baylor correctly bet on stocks tied to a reopening economy, but not how you might think: Baylor loaded up on stocks like FleetCor, a fuel-payments provider for truckers, and Accesso, which does ticketing software for theme parks. 

Baylor makes relatively concentrated bets. As one staffer noted, “We don’t try to be diversified; we don’t try to be invested in all things.”

From The Wall Street Journal

Why it matters:

Endowments are important funds to support teaching and research at colleges, and their specific legal structure is designed to “indefinitely perpetuate a pool of investments.”

  • Baylor has about 20,000 students and a $2 billion endowment, up from $900 million in 2011.

  • Today, Baylor draws less than 10% of its operating budget from the endowment, which helps pay for faculty salaries, student scholarships, and new buildings on campus, like a brand-new athletics arena that cost over $200 million

As Warren Buffett often says, it’s easier to generate large gains on a smaller amount of money. The same holds true for endowments. Some Ivies manage tens of billions of dollars. And, to be sure, Baylor’s strategy has benefited from more volatile markets in recent years, so it remains to be seen if it can keep pace over time. 

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🏙️ Boston Faces Budget Shortfall From Office Market Woes

Familiar with the Butterfly Effect? Five years ago, it would’ve been impossible to predict that a pandemic would soon stall the global economy, normalizing remote work generally and pushing people out of offices, leaving cities like Boston — relying heavily on property taxes — short of funds as office building values plummet. But here we are.

While regional banks, which often lend heavily to commercial real estate projects, garner much concern from the fallout in office values, cities also feel the sting.

For Boston, declining office building values, as companies have less and less demand for square footage, will cost the city over $1 billion in tax revenue over the next five years, according to Bloomberg.

  • Built into those assumptions are projections from McKinsey, suggesting office values will fall 30% or more through the end of the decade.

Why it matters:

No Tea Party: Boston, a city known for its “overreliance on commercial property taxes,” is suffering from nearly 16% of its downtown office space sitting vacant — double the pre-pandemic rate.

More than a third of the city’s tax revenues are tied to commercial real estate, compared with 5-15% in Chicago, Miami, New York, and Washington, D.C.

  • Where other cities pad their budgets with local sales and income taxes, such measures are largely prohibited at the local level in Massachusetts.

  • Although new efforts aim to incentivize developers to convert empty office space into housing, this wouldn’t entirely fix the city’s budget problems because commercial properties are taxed at a higher rate (2.5%) than residential ones (1.1%).

More Headlines

🤯 Nvidia is now worth more than Alphabet, one day after passing Amazon

🪧 The number of striking U.S. workers more than doubled in 2023

📱 New York City sues social media platforms over youth mental health crisis

💬 Walmart and Target champion ballot measure in California meant to crackdown on retail theft

🚀 SpaceX launches mission to land first private spacecraft on the moon


👉 Emerging Market Investors Cut Out China

Hoping to invest in the promise of emerging market growth but want to avoid investing in China?

It’s a pressing question on some investors’ minds, given that popular benchmarks for emerging market stocks have over a 25% weight to Chinese companies. Including Taiwanese firms, which sit in the middle of a potential U.S-China conflict, that figure jumps over 40%.

  • Despite offering the promise of “global diversification” across dozens of countries, major emerging markets funds are often quite concentrated. Like many of its peers, BlackRock’s emerging markets ETF (ticker: EEM) is ~60% concentrated in China/Taiwan and India.

  • While emerging markets investments are often framed as “riskier,” few likely realize they’re largely investing in China and Taiwan when they select to allocate a portion of their 401K to emerging markets funds.

Geographic breakdown of the iShares MSCI Emerging Markets ETF, % of market value

Why it matters:

Cutting China exposure altogether is increasingly popular. Net capital inflows into emerging markets ETFs excluding China more than tripled last year to $5.3 billion.

  • Meanwhile, China-focused ETFs endured over $800 million in outflows in 2023.

  • One portfolio strategist states, “The correlation of Chinese equities towards other major emerging markets has absolutely collapsed in the last few years. There is certainly a percentage of our investors that just prefer not to have China in their portfolios at all.”

  • In 2015, when emerging market ETFs ex-China were first created, Chinese stocks held over a 40% weight in emerging market stock indexes.

It’s not that investors have lost interest in the world’s second-largest economy. Rather, China seems to have outgrown the “emerging market” label. As the FT writes, it makes more sense to “treat the country on its own instead of as part of any investment universe.”

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Quick Poll

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Yesterday, we asked: For Valentine's Day, there will be lots of gift-giving and exchanging of little luxuries. How often do you buy new accessories?

— Wrote a reader who voted once a year or less said, “...a lot less. What do you do with all that stuff?

— Another commented, “I like to treat myself from time to time. Small gifts to yourself or others keep life interesting!


At roughly $50 billion, Harvard is the world’s richest school, boasting a massive endowment.

See you next time!

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