Colleges are Liquidating Private Capital Assets in Response to the Trump Administration 

Thaddius A Gamueda
Staff Writer

Donald Trump’s administration has begun to cut funding to high profile colleges in the United States based on DEI initiatives and failures to protect Jewish students during pro-Palestinian protests during the last year. As of April 24th, around $2.2 billion has been cut from 7 top universities in the United States, 6 out of the 7 being Ivy Leagues. Harvard has led the resistance against the cuts by suing the Trump administration and many colleges are joining the suit. These recent events have created many new financial challenges for these colleges that have led to universities making tough decisions to cut their funding. 

New Liquidity Challenges Colleges Face 

To begin with, colleges, especially the Ivy League, have historically been some of the top investors for private equity (PE), which are usually classed as a long-term, illiquid investment. As these federal funds are being cut, colleges are having trouble financing themselves. According to Commonfund.org, the 658 colleges in America hold an endowment of $873.7 billion, and use only 15.3% of it as operating expenses. Yale and Harvard are in the top 30 largest PE investors on the planet and two of the pioneers when it comes to private equity investing for colleges. Axios states that Harvard uses 39% of its $53.2 billion endowment to invest in private equities and CTPost reported that Yale uses 45% of its $41.4 billion to invest in private equity as well. Because of the fears of having federal funding cut, Yale has begun a $6 billion sale of their private equity portfolio into the secondary market while Harvard is leading the charge because of their new suit. Now we know how much some of the top universities invest in PE, what has come from these investments? 

 

What Inovations have been made possible by University PE Investment?

Private equity investments by university endowments have supported breakthroughs across multiple fields: 

• Biotechnology: Yale-affiliated investors helped launch companies like Beam Therapeutics, which develop base-editing therapies for genetic disorders. These ventures build on academic research into CRISPR gene editing. 

• Clean energy: Partners backed by Harvard’s endowment helped commercialize advanced battery materials at institutions such as MIT and Stanford. These technologies are now used in grid-scale energy storage projects. 

• Artificial intelligence: Endowment-backed funds seeded startups such as PathAI, which uses machine learning for diagnostic pathology, and Sift Science, which applies AI to fraud detection in e-commerce. 

• Education technology: Secondary market sales by university LPs have been reinvested in edtech companies that provide personalized learning platforms adopted by K–12 districts nationwide. 

These successes illustrate how private capital can catalyze research discoveries and generate financial returns when portfolio companies achieve exits. The Trump administration deciding to cut funding creates an unnecessary roadblock in research and leads to stagnation for many of these groundbreaking programs. 

 

What is the Short-Term Outlook for Colleges and Private Equity Funding? 

Over the next 12 to 18 months, universities are implementing several measures: 

1. Secondary-market sales: Many endowments will continue to sell illiquid private equity stakes. Fund managers are offering net asset valuations (NAV), based tender offers to deliver liquidity without deep discount auctions. These funds will allow the universities to manage their finances and new risks because of the Trump administration. 

1. Legal remedies: Universities participating in lawsuits against the Department of Energy, NIH, and the Department of Education may secure injunctions that restore grant funding. Harvard’s case, supported by Princeton, Michigan, and others, could lift funding freezes by late 2025. 

1. Portfolio rebalancing: Endowment committees plan to increase allocations to public equities, fixed income, and cash equivalents. Some schools are issuing short-term bonds or setting up commercial paper programs to ensure at least one year of operating reserves. 

What is the Long-Term Outlook? 

In the coming decade, political and market forces will likely reshape endowment strategies and private equity offerings: 

• Liquidity-focused allocations: Universities may cap illiquid investments at 25–30 percent to balance returns with operational flexibility to cut down risks and pressure set by future administrations. 

• Regulatory reform: Congress might define clear limits on grant-freeze authority, incorporating due-process safeguards in Title VI enforcement and indirect-cost regulations. 

• Tax and reporting changes: Increased oversight could lead to revised excise taxes on endowment income and enhanced reporting requirements, prompting more diversified university revenue models. 

By combining immediate liquidity measures with long-term strategic changes, colleges can safeguard their financial health and continue supporting innovation—even amid shifting federal policies.  

As a student, parent, alum, or concerned taxpayer, you should monitor how these funding disputes affect tuition rates, financial aid availability, and campus resources. Changes in grant funding may influence scholarship programs, research opportunities, and even hiring decisions on campus. Keep an eye on announcements from university financial offices and follow credible news outlets for updates on grant restorations and endowment reallocations. If you have a stake in higher education, your engagement in public comment periods and legislative hearings can help shape the policies that govern university funding and endowment management. 

 

 Contact Thaddius at thaddius.gamueda@student.shu.edu