Yale’s Endowment Falls 25%

College Search & Selection
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<p>Don't know if this has been posted yet.... any other figures about other colleges please post.</p>

<p>Yale’s Endowment Falls 25% </p>

<p>By GERALDINE FABRIKANT
Published: December 16, 2008
Yale University disclosed Tuesday that its endowment had fallen 25 percent, or $5.9 billion, in the four months since the end of June, as the decline in asset values during the financial crisis took its toll on another university.</p>

<p>Yale’s president, Richard C. Levin, said in a letter to the university’s faculty and staff that the endowment totaled an estimated $17 billion as of Oct. 31, and he warned that Yale could be facing a $100 million shortfall in the 2009 school year.</p>

<p>He said the value of Yale’s marketable securities alone had declined 13.4 percent for the first four months of the university’s fiscal year, ending in October, and that it had since fallen further. Taking into account such illiquid assets as real estate and private equity, he said, the endowment, which is led by David Swensen, was down 25 percent, and the school is now anticipating it will be down that much for its full fiscal year.</p>

<p>Earlier this month, Harvard University said its $36.9 billion endowment had lost 22 percent of its value during the four months ending on Oct. 31 and that it expected the total decline for the full fiscal year to be as much as 30 percent.</p>

<p>But the figures given by each school are essentially projections and could vary sharply between now and the end of the year, financial experts warned. "We have no idea to say where they are going to come out," said David Salem, the president of the Investment Fund for Foundations, which manages money for endowed charities. ”In this environment, the relative success or failure of any of these endowments will depend on how they mark to market all their nonmarketable assets at the end of the fiscal year. ”</p>

<p>Endowment experts follow Harvard and Yale in particular because Yale has had the best performance with its endowment investments over the past decade, with Harvard a close second. Yale has posted a 16.3 percent average annualized return, while the comparable number for Harvard was 13.8 percent.</p>

<p>Yale put out the announcement to underscore that there would have to be some belt-tightening going forward. While a $17 billion endowment is huge, the university is also very dependent on it, since the endowment provides 44 percent of Yale’s $2.7 billion budget. Mr. Levin warned that the 25 percent decline was likely to lead to a $100 million shortfall for the 2009 school year that would grow to more than $300 million by the 2013 school season.</p>

<p>To mitigate the impact of the shortfall on budget planning, the school said that it would not move to close the entire gap in the next school year. Instead, it would seek to achieve a half to two-thirds of the reductions in its operations needed to close the gap.</p>

<p>Mr. Salem said that he had read many such letters this season from universities and that Mr. Levin’s effort was unusually cogent and would help the school manage its budget crisis in a strong methodical way.</p>

<p>While Yale did not break out the sources of the endowment’s declines in a period where virtually every category of investment has been hurt, it appears that Yale may have had some key benefits over Harvard. Several endowment experts noted that historically Harvard borrowed money to help increase its returns, whereas Yale did not. In declining markets, investment funds that use leverage may have to sell assets aggressively to meet margin calls.</p>

<p>In addition, in the last fiscal year Harvard posted an 8.6 percent return compared with Yale’s 4.5 percent. At the time, Harvard said that its investments in assets including liquid commodities, timber, land and real estate had beaten their benchmarks. But that weighting in liquid commodities that benefited Harvard last year may have been a liability this year as that market tumbled. Harvard said that its asset location goal for liquid commodities was 8 percent. Yale does not release such a figure, but several endowment experts believe it was a smaller investment and may have been hedged.</p>

<p>Also, Harvard had roughly 22 percent of its endowment in foreign equities where Yale has roughly 15 percent. That sector has been hit as well.</p>

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<p>are you surprised......</p>

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<p>Hah...you beat me to the punch. Also, Harvard has stopped all tenure track professor searches in the interim.</p>

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<p>What do they spend their endowments on? I find it hard to imagine a school their size spending billions, or even 100s of millions</p>

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<p>They use their endowments "income" to fund their daily operating budget. The annual operating budget for Yale is 2.8 billion. Its not a small enterprise.</p>

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<p>I'm not sure how much the endowment has taken a hit at Stanford in terms of percentage, but trust me H and Y are not the only ones hurting. Every school is feeling the crunch and will have to adjust.</p>

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<p>Yeshiva lost a crap load too Bloomberg.com:</a> U.S.</p>

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<p>I was just wondering: say a college admits a (low-income) student with the promise of financing his or her tuition and other fees for all for years (imagine the student got into Stanford or somewhere with a similar financial aid plan). And then the school gets hit really hard by the economy and its endowment falls.</p>

<p>Do you think the college would keep its promise to the student or say "hey you can't pay, bye?"</p>

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<p>
[quote]
Do you think the college would keep its promise to the student or say "hey you can't pay, bye?"

[/quote]
</p>

<p>There is no evidence of that happening at any of the wealthiest colleges despite the massive drop in the endowments. The opposite is actually happening. Some colleges are now giving financial aid to enrolled students whose parental financial situation has worsened because of the economy and who may not have have initially received any aid. That is happening at places such as Harvard, Princeton and MIT. In the short term it is wreaking havoc with the budgets of the schools, but they are not ready to shelve the generous plans they put in place over the past few years. They will cut back on new hires, defer new construction, dig deeper in their endowments and borrow their way through the deficits until the situation improves. </p>

<p>Students at schools with smaller endowments wil not be so lucky: these schools depend largely on tuition revenues and can't afford to be generous. They need your check to pay the bills.</p>

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<p>The</a> Harvard Crimson :: News :: Harvard Endowment Fell 22 Percent in Four Months</p>

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<p>The NYT also has a piece saying it's 13.4%, which I thought was pretty good all things considered. But I've since seen the 25% figure (Wall Street Journal, etc). I wonder what gives.</p>

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<p>"Marketable securities" have only accounted for about 30% of Yale's endowment in recent years. They are the most heavily invested in alternative non-liquid investments like private equity, hedge funds, real estate partnerships, timber partnerships, and so forth.</p>