<p>so cks, do you believe the stated losses for the endowments are accurate?</p>
<p>Why wouldn’t they be?</p>
<p>my guess is they are using historical marks for PE and not what they would bring in the market today. Remember, the last few years they all began following the yale or harvard model where more and more went into non traditional investments. Last year, i believe the only asset class to go up was u.s. debt.</p>
<p>Ha, catg, it depends on how you count. I believe they are accurate for what they are counting.</p>
<p>It is true that we really do not know the full impact of on the endowments yet. Alternatives can be very difficult to price, especially when there is no market…but that does not mean there is no value.</p>
<p>As noted earlier, schools were required (by their investment rules) to re-balance when their asset allocations were knocked out of whack and this caused a cash shortage. Still, schools that manage a lot of their own money have a very long-term investing horizon. </p>
<p>This is a huge bump in the road, but it will not fundamentally change their long-term focus. Even their strategy will stay mostly the same, although there will be more worst-case scenario modeling and sensitivity analysis in the future.</p>
<p>Oh, and alternatives are definitely the way to go. Managing endowments is (should be) about risk/return management. A small, but significant, portion of an endowment can be found in illiquid investments. However, most alternatives are not illiquid.</p>
<p>"so cks, do you believe the stated losses for the endowments are accurate? "</p>
<p>Ditto, CKSABS response, but with an exception. Many New England boarding schools followed their Ivy older brothers into the Yale-type investment philosophy of matching long term investment to long term needs. A very long term investments, timberland, was divested from timber companies, and sold and resold by the endowments, spinning the prices up in a classic bubble. “Dutch Tulips” for those schooled in economic history. The currently prices/values set for the timber lands in endowments far exceed the actual value of the land or future potential income steams. Its a bubble as yet burst. Yes, some of the illiquid assets in endowments are very overvalued in both the short and long term.</p>
<p>I’d love to be the fly on the wall as the endowment trustees figure out just how much the glorious and well commissioned gains in the endowment values of the past 7 years were actually the result of endowment fund managers flipping increasingly overvalued illiquid assets to each other.</p>
<p>That’s pretty good insight Toadstool. One clarification on timber is that it is a very different asset class. (My first consulting assignment was evaluating a large insurer who at the time was also the largest timber owner.) It’s a funny asset class, but the upshot is you have a reaped the bulk of your return after holding the timber for 10 years. It has to do with taxes and explains why today (after tax changes a few years ago) you so have much relative portfolio turnover in what used to be considered a moribund asset class (but with very little market correlation). </p>
<p>You may be right about timber in this market for those that have to sell. You can look at the endowment assets and see how long timber has been on their books to have a good prediction of who will need to sell shortly and test your theory.</p>
<p>One of my friends currently attends ____________ as a day student. Her mother is in charge of collecting money from alumni’s for the schools FA budget. She told me that __________'s funding has gone down over the years, offering less FA money for applicants. This is a very well known school and it is very sad to hear that some kids cannot attend BS due to FA.</p>
<p>Yes, it’s very sad.</p>
<p><a href=“http://www.marketwatch.com/news/story/GM-preparing-possible-bankruptcy-report/story.aspx?guid={9BE2FACB-AE20-4915-ACC0-382664116BBC}[/url]”>http://www.marketwatch.com/news/story/GM-preparing-possible-bankruptcy-report/story.aspx?guid={9BE2FACB-AE20-4915-ACC0-382664116BBC}</a></p>