Linda S

You can find out pretty much EXACTLY what each and every school's endowment is invested in by fund by going on GuideStar nonprofit reports and Forms 990 for donors, grantmakers and businesses and looking at their 990.
I'm not up for it tonight, but if someone really wanted to you could find out what a given school had as of the last 990 (which posted on line is probably July 07 at this point, could still be July 06), figure out how many shares that was based on the value at that point in time and then see how much that is worth today. It is all 100% public information.

sbergman

My perspective is probably a little different. Yes, our budget is tight this year. More families have requested and been given financial aid. However, I am sitting on the campus of a school that was founded in 1905 by a group of Episcopal monks from NYC who wanted to offer the "barefoot boys" of Appalachia a good education when no public education was available in the area. Although our students are no longer barefoot, we continue to provide 40% of our students with financial aid. We're mission driven and our mission becomes more compelling in tough times when more students need aid and education becomes an even more important (and smart) investment.

I think the schools that may be in the biggest trouble are the plethora of small day schools (particularly the Christian academies) that have popped up around the country and are completely tuition driven. The rest of us have weathered the Great Depression, world wars, and the Asian financial crisis. We know how to go lean when the times require it.

MassDad2

A reply to Post #15 by italianboarder. I can understand why you might guess that a typical endowment is in 100% U.S. government bonds but this is not the case. Endowments tend to diversify their investments and typically hold a combination of stocks, bonds, and other long-term investments (real estate, private equity, etc.). Many use hedge funds to manage their investments as well as more classic strategies that are similar to equity and fixed income mutual funds.

The reason for the a diversified approach to asset allocation is to meet the objective you mention in your second paragraph. Over time U.S. government securities have matched inflation, but exceeded. Given that schools want to withdraw money from their endowment fund, and keep the fund level or increasing on an after-inflation basis, risker investments are required.

italianboarder

But how much of their assets would be located in risky investments? My mind keeps telling me no more then 20%. I mean Bank of America Corporates pay at like 8% and the tax on those are just great... So if they use about 5% a year and are getting 8% return... PLUS donations...Wouldn't that be enough risk and possibly the most favorable investment of choice to combat inflation and the necessary withdraws?

I don't know... Risk is a touchy issue for schools. I can't see them taking aggressive standings that most hedge funds enjoy... I doubt they leverage also. So risk in that aspect has to be very low.

Periwinkle

Linda S., I took a look at various schools' 990s on Guidestar. I'm very, er, frugal, when it comes to research, so I'm not signed up for "Guidestar Select." Thus, I could only access forms from '05 or '06. I was surprised by how much variation there is in schools' investment decisions. This probably reflects the investment acumen of business managers and trustees, and a school's own investment history. The very largest listed at least some investments in hedge funds or private equity. I only found one school which seemed to have a majority of their investments in savings bonds.

Newyorker22, at present the effects may be concentrated in the New York region? Even if parents of prospective applicants are employed, and able to afford boarding school, to witness so many of one's friends and neighbors losing jobs and savings all at once must have a chilling effect.

Balto55

Here is the endowment structure of a major west coast private university as of last spring. I imagine it is quite close to the allocation of boarding schools with large endowments. Absolute return is hedge funds.

Allocation
Domestic Equity 30%
REITs 5%
Int'l Developed 20%
Int'l Emerging 5%
Private Equity 15%
Absolute Return 15%
Fixed-Income 10%
Total 100%

Old1

I am involved professionally with numerous not-for-profits (although not schools). Not only are the endowments off significantly at every one of them, there is a serious concern that this will be a protracted downturn. Although many nfp's use a rolling average when markets are rising, there is a growing school of thought that this is inappropriate in down markets and may risk exposing the trustees (who have fiduciary responsibilities) to charges of fiscal irresponsibility. Some very experienced and very savvy investors on our boards are taking the position that we must foremost focus on asset preservation to the detriment of return. This means there will be much less income to spend and everyone is starting to draw up a plan B reduced budget.

leanid

Old1,

What is meant by a "rolling average"?

When you say "asset preservation" does that mean don't sell and just hope for a rebound? If so, I'm guessing their investments are with companies that have been around a long time and have weathered the downs as well as benefitted from the ups -- a very conservative and prudent approach.

One problem I see with that (though, admittedly, I don't closely follow the market) is that investing in "blue chip" companies (if that's what they are doing) is not as secure as it once was. Everything appears to happen much faster in this highly competitive, global economy, and what was once a very wise place to put one's funds may be far riskier today. I realize that new companies take over as blue chippers but their hold seems far more tenuous, hence riskier investments for the long haul.

Linda S

"Rolling Average" means that for whatever date the organization picks - for mine it is December 31 - you take the balance of your accounts on that date for the last 5 years (some use 3) and average them. It's "rolling" because each year you drop the oldest year and add the latest one.

creative1

"I am more concerned with the return of my money then the return on my moeny." - Mark Twain

creative1

leanid - Given what Balto55 posted above for one school and what I've seen glancing at 990s, it definitely sems like more than "blue chips"

Old1

Increasing the percentage of treasuries and cash equivalents. Also hedging positions through inverse ETF's.

hsmomstef

sbergman was correct when he said that the smaller day schools/private schools will be effected most. The first one in our area closes this week. The school was unable to make the interest payments on a construction loan they took out to build their school building in 2003 and were unable to refinance the loan. The combination of declining enrollment and increasing interest rates did them in.

Renaissance Academy closes suddenly - News - MSNBC.com

neatoburrito

From the SSATB site - member newsletter

SSAT MEMBERS WEBSITE

creative1

Thanks for that post neatoburrito. A very interesting read. The newsletter article quotes:
"Most private schools are not reporting dramatic declines in enrollment, but acknowledge they are relying more heavily on their waiting lists to offset the students who are leaving for less-expensive or public schools"

When you think about Spring of 2008 vs. Spring of 2007, it definitely holds true. In 2007, those of us with kids applying saw ZERO movement off waitlists and many schools overenrolled. This past Spring, even top schools went to their waitlists.