<p>the only thing surprising about this article is that it’s about Cambridge… THE Cambridge. But other British universities have been under the gun to raise money for the past fifteen years - they’ve been challenged to be more entrepreneurial and less dependent on the state. This is one reason why so many British schools are now offering expensive study-abroad/summer-session programs for foreign students.</p>
<p>[MIT</a> on track despite $1.8B investment loss - Boston Business Journal:](<a href=“http://boston.bizjournals.com/boston/stories/2010/01/04/daily4.html]MIT”>http://boston.bizjournals.com/boston/stories/2010/01/04/daily4.html)</p>
<p>MIT released its financials-alot of these schools sure make it awfully hard to find their financials.
What struck me is that they include private equity and venture capital in the Equities category.$4.5B of their $5B in equities in tier 3 and according to my read that is primarily private equity and venture capital. Normally you would see those as alternative investments.</p>
<p>In addition to being slow with their year-end financials, I’ve also seen a school or two that appears to be unwilling to update their websites with new enrollment numbers reflecting decisions to add students in an effort to generate revenues.</p>
<p>[Stanford</a> assets, endowments fall in dire economy](<a href=“http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2010/01/06/BAHM1BE3JU.DTL]Stanford”>http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2010/01/06/BAHM1BE3JU.DTL)</p>
<p>Besides drop in endowment income Stanford and other U’s also getting hit hard by decine in annual giving and demand for scholarships.</p>
<p>[Harvard</a> to Sell $480 Million for Capital Projects, Refund Debt - BusinessWeek](<a href=“Businessweek - Bloomberg”>Businessweek - Bloomberg)</p>
<p>Harvard already borrowing another $500M. I really don’t think things are improving for those U’s like Harvard and Yale that are not invested in public equities. Private equity is a mess still, real estate - especially commercial real estate - is getting worse and who knows whats happening with hedge funds other than alot of these guys seem to be getting arrested for dealing on inside information. You swim with sharks and…</p>
<p>[url=<a href=“http://www.washingtonpost.com/wp-dyn/content/article/2010/01/08/AR2010010803584.html]washingtonpost.com[/url”>http://www.washingtonpost.com/wp-dyn/content/article/2010/01/08/AR2010010803584.html]washingtonpost.com[/url</a>]</p>
<p>Interesting info. on schools being a little less generous with financial aid.</p>
<p>I’m still enjoying your posts…sm74. :)</p>
<p>You should start a new thread with that Washington Post article.</p>
<p>
</p>
<p>Do tell? I wonder if his concern for low income students is why Marx at Amherst is raising the expectation for summer earnings by an average of $1700 a year per fianancial aid student – a totally unrealistic number?</p>
<p>Maybe he could explain how his five year budgets call for zero growth in the number of fianancial aid students, despite already budgeted back-to-back 5% tuition increases, while still maintaining need-blind admissions. Maybe he figures that, by reducing all aid packages by $1700 a year, low-income students will enroll elsewhere?</p>
<p>And, while he’s explaining all that – in between chest-thumping to the Washington Post – perhaps Marx could explain why his is the only top LAC that has yet to release its year-end financial statements from the fiscal year ending over 6 months ago? And, why his school’s website has not updated their enrollment to reflect the large increase this year as a revenue enhancement? Why are they misleading applicants with last year’s lower enrollment coupled with last year’s larger number of professors? Perhaps Mr. Marx is waiting for the admissions deadline to pass before being as forthcoming as his peer colleges. Maybe he should spend less time misleading the Washington Post and more time making relevant data available.</p>
<p>To be perfectly honest, the financial mismanagement at Amherst College is so stunning that it is difficult to even comprehend how Tony Marx has a job. Amherst had to borrow $100 million in taxable bond debt last year to cover operating costs, they have over $300 million in debt, and over $500 million in outstanding cash call commitments – on a new endowment of $1.3 billion. I’m sorry to be harsh, but the chutzpah it must take for Mr. Marx to brag about the fianacial peformance of his school is breathtaking. Under his leadership, Amherst has turned a silk purse into a sow’s ear.</p>
<p>What is even more troubling is the snotty assumption that associates a “great education” with a highly selective private school. S1 is at a peer school, while S2 is in an honors program at a flagship state university. While S1 is having a very good academic experience ( S2, despite initially being disappointed at the outcome of the admissions process is also doing fabulously well. The biggest difference is that despite all of the braying of the Anthony Marx’s of the world, the atmosphere at the top NESCACs remains very much that of the wealthy country club, with low and moderate income students as guests auditioning for entrance into the club. Now, all of this is very good in terms of contacts, but otherwise–spare me.</p>
<p>[CalPERS</a> to disclose details about intermediaries - latimes.com](<a href=“http://www.latimes.com/business/la-fi-calpers11-2010jan11,0,3782598.story]CalPERS”>CalPERS to disclose details about intermediaries)</p>
<p>The placement agency issue is getting ready to blow-up with pension funds. I’d be willing to beat that placement agents are very active in the endowment area as well. Alot of folks got very wealthy pushing alternative investments-makes you wonder how much profit really finally got to the limited partners after all these guys took their share.</p>
<p>An interesting proxy for the difference between what private equity firms say their investments are worth and what you could really sell them for is the company Conversus Capital. They are a publicly traded company whose purpose is to invest in top-tier private equity companies. Attached is a graph of the difference between what Conversus says the NAV of their holdings is and what the stock trades for which still reflects a value of around 50%. </p>
<p><a href=“http://www.conversus.com/images/20027/Price%20vs%20NAV%20-Nov%2030%202009(4).pdf[/url]”>http://www.conversus.com/images/20027/Price%20vs%20NAV%20-Nov%2030%202009(4).pdf</a></p>
<p>[Buyout-Backed</a> Bankruptcies In 2009 Well Ahead Of 2008 - Private Equity Beat - WSJ](<a href=“http://blogs.wsj.com/privateequity/2010/01/11/buyout-backed-bankruptcies-in-2009-well-ahead-of-2008/]Buyout-Backed”>http://blogs.wsj.com/privateequity/2010/01/11/buyout-backed-bankruptcies-in-2009-well-ahead-of-2008/)</p>
<p>Virtually daily stories concerning private equity bankruptcies. Today’s WSJ details another big one-MGM.</p>
<p>[Harry</a> R. Lewis: Larry Summers, Robert Rubin: Will The Harvard Shadow Elite Bankrupt The University And The Country?](<a href=“Larry Summers, Robert Rubin: Will The Harvard Shadow Elite Bankrupt The University And The Country? | HuffPost Entertainment”>Larry Summers, Robert Rubin: Will The Harvard Shadow Elite Bankrupt The University And The Country? | HuffPost Entertainment)</p>
<p>Interesting reading on the inner workings at Harvard</p>
<p>[Harvard</a> University Audited as Part of IRS Probe of Nonprofits - BusinessWeek](<a href=“Businessweek - Bloomberg”>Businessweek - Bloomberg)</p>
<p>Probably not too happy about this</p>
<p>I think we need to cut the HYP some slack- its easy to criticize an accident after it has happened. </p>
<p>If the Investment bankers at Goldman, Lehman, Morgan stanley, most of who went to Wharton, U of C, or Harvard business school, could not predict this down fall, who are we to say that we could have done better?</p>
<p>I guess im trying to say that who are we to criticize the actions of the Harvard, Yale, and Princeton business scholars, the brightest in the world (maybe except for U of C and Wharton)? I seriously dont believe that we know enough to criticize their investments in seemingly stupid derivatives, which are incredibly complex.</p>
<p>Well, it’s kind of easy to give HYP some grief because they performed so badly compared to most other college and universities. Most did not mismanage their endowments so badly that they had to borrow money to make payroll like Harvard, Yale, and Princeton had to do.</p>
<p>and Amherst</p>
<p>jasoninNY…they are not the brightest in the world. They like to tell us they are the brightest in the world. </p>
<p>Big difference. ;)</p>
<p>They deserve the grief.
They are incompetent.</p>
<p>Jason, my biggest concern with what has happened- and has happened in the most pronounced way with the big endowment schools-is their decision to move so much of their money from public equities and bonds to all manner of private investments. Attached is a chart from MIT that clearly shows what has happened there and elsewhere:</p>
<p>[MIT</a> Pool A Asset Allocation](<a href=“http://web.mit.edu/fnl/volume/205/alexander1_pop.html]MIT”>MIT Pool A Asset Allocation)</p>
<p>These schools continue to stand by this approach. I think what is becoming clear is that there are 2 problems with these private investments:</p>
<ul>
<li>General Partners of these private investments in many cases are taking incredible risks and using alot of leverage</li>
<li>Secondly, because they are private investments the School really doesn’t know what its worth and given the fact that some of these private investment companies have proved to be ethically challenged(how many ponzi schemes and insider trading schemes do you need to read about) the real returns you are getting could be substantially less than what you think you are getting. </li>
</ul>
<p>So the issue I hope the schools will address is whether it is the right thing to be putting so much of the endowment in high risk investments. In the past that has been very profitable for the endowment managers and the owners of these private investment vehicles–I don’t think its been good for the U’s despite what they have said.</p>
<p>I believe in getting a good wage. I believe in getting bonuses for work really well done. But I don’t believe any of these people are doing their jobs really well. I agree that thinking you have all the answers is a recipe to prove just how wrong you are. While risk in investments is part of the process, assessing that risk has not proven to be any of these people’s strong suits. The definition of insanity is doing the same thing over and over and expecting different results. The Tortoise and the Hare analogy seems apt in this case.</p>
<p>sm74,
The chart on MIT’s asset allocation (link in post #458) is interesting, but could you (or someone else) provide a little more interpretation for those of us who are not so savvy about these things? To me it looks like MIT’s investments in “private equity” and “real estate” have not changed that much over the years, at least since about 2001. What’s grown is “marketable alt.” (whatever that is), “real assets” (as opposed to “real estate”), and “international equity” (at the expense of U.S. equity). I imagine international equities might be a little more volatile than domestic equities if they’re heavily titled toward emerging markets plays, and in any country given that currency fluctuations would be factored into asset valuations; but at least those should be liquid markets. But what’s “marketable alt.”? And what are “real assets” as distinct from “real estate”?</p>