Colleges and universities, in a move they hope will ultimately raise their endowment returns, are among the buyers of risky bonds backed by subprime mortgages, according to today’s Wall Street Journal.

Wake Forest University, with an endowment of $1.2-billion, is placing $25-million with a hedge fund to invest in subprime mortgages. The value of such mortgage-backed bonds has dipped severely in recent days, and so “there’s an opportunity out there to buy these loans at a discount,” Lou Morrell, the university’s treasurer and vice president for investments, told the newspaper.

Because of their long investment horizons, university endowments tend to be less averse to risk than other types of investors. Many large institutions, and an increasing number of smaller ones, invest in alternative assets, such as hedge funds and private equity. According to survey data released in December by the National Association of College and University Business Officers and TIAA-CREF, universities with endowments exceeding $1-billion had more than 40 percent of their money invested in such assets as hedge funds, real estate, private equity, and venture capital. —Audrey Williams June