Is Harvard Just a Tax-Free Hedge Fund?

Here's a question for ya: Is Harvard Just a Tax-Free Hedge Fund? | Economics | The American Scene.

Viewed purely in terms of economics, Harvard is really a $40 billion tax-free hedge fund with a very large marketing and PR arm called Harvard University that has the job of raising the investment capital and protecting the fund’s preferential tax treatment.

I think this is a fascinating way to look at the university, particularly Harvard.  The university's large endowment enables it to achieve returns that universities with smaller endowments typically cannot match.  While the investment returns of both endowments are tax free, does a fund which participates in all the exciting excesses of the hedge fund/private equity/LBO business still manage to deserve to be treated as a not-for-profit?

The author of this post goes on to ask:

When tax-advantaged non-profits start to accumulate billions of dollars of cash through investment gains, and the insiders seem to be doing very well, it creates legitimate pressure for some legal changes.

I'm inclined to agree.