No balls

Princeton leverages its endowment, apparently as part of its investment policy. It has outstanding debt of $3,500,000,000, at an average cost of about 4%, and it has endowment investments of $23,800,000,000, at a 10-year average annual return of 7%. The 3% spread is leveraging, which raises three questions:

(1) Is leveraging an appropriate investment practice for college endowments?

(2) If no, why does Princeton do it?

(3) If yes, why isn't Princeton doing more of it? Instead of 15% leverage (3.5 divided by 23.8), why not 50%, or more? This is not small change--$250,000,000, at 50% leverage.