This reduction comes as large institutions such as pension and endowment funds pressure fund managers to lower fees in response to lower fund returns in recent years.

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During the '50s and '60s, the endowment funds of Harvard, Princeton and Yale owned bonds, as did most corporate and state pension funds.

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As he moved Legg Mason away from broking into asset management, he began to count more big endowment and corporate-pension funds among his clients.

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That is not enough to pay for pension promises, so funds decided to follow the example of Yale University, whose endowment diversified into hedge funds and private equity in the 1980s.

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In America, hedge-fund investment, which among institutions used to be largely confined to endowment funds, is spreading to pension funds and insurers.

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Schools are committing to reducing their carbon dioxide emissions, they're funneling endowment money into renewable-energy investment funds, and students--the engine behind much of this growth--are pushing for more.

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One is ProPublica, which funds investigative journalism from an endowment given by Herbert and Marion Sandler, the founders of Golden West Financial, a big subprime lender (making it one of the few good things to come out of America's mortgage mess).

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In the case of the universities, for example, the Conservatives say that they would use the proceeds from future privatisations and government auctions, such as the recent auctions of radio spectrum, to create endowment funds for selected universities.

ECONOMIST: Ready to rumble