<p>Old news. Announced in 2009.</p>
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<p>Well, it wasn’t “old news” to the potential applicants for the current freshman class. Those applicants heard the news and didn’t apply in droves. Applications for this year fell by over 30% with the new policy, in one year. It doesn’t take many 30% declines in applications to put a serious hurt on a college.</p>
<p>It is old news for Olin. The current first-year class at Olin was the first to be admitted on half tuition scholarship. Although applications were down a bit last year (it’s difficult to draw conclusions based on such a small sample, over just a few years) the yield did not suffer. In fact, in addition to the class of 80-some that enrolled, over 20 took up the deferral option. Which means that this year, Olin will only be accepting 60-some students. With over 750 applicants this year, it will definitely be one of the most competitive college admission cycles in the country.</p>
<p>IDad, I am concerned about Wellesley being on here. Any thoughts or insights?</p>
<p>Just to be clear, being on this list is good. These are the college and universities with the the top ~240 or so endowments in the country. </p>
<p>Being near the top of the list is bad because those schools performed relatively poorly in terms of endowment losses among those peers. Being near the bottom of the list means relatively better endowment peformance.</p>
<p>I have a hard time following Wellesley’s financials. I cannot find their annual financial statements online. However, their investment office was staffed through a revolving door with Harvard’s investment office and probably followed the same high-risk allocation strategies. In many cases, the heavy allocation in private equity caused poor performance, not just because the investments tanked, but because the created liquidity problems to meet the cash calls, which mean unloading publicly traded stocks and missing the market rebound.</p>
<p>For example, Amherst did much worse than Williams and Swarthmore because they were more heavily invested in private equity and less heavily in public equities and cash. They were forced to borrow $100 million in taxable debt to meet their cash needs, debt that makes their endowment losses even worse than shown by this list in real terms. I don’t know the details of Wellesley’s situation, but it was almost certainly a result of investment allocation.</p>
<p>[Insider</a> Trading Inquiry Steps Up Its Focus on Hedge Funds - NYTimes.com](<a href=“Insider Trading Inquiry Steps Up Its Focus on Hedge Funds - The New York Times”>Insider Trading Inquiry Steps Up Its Focus on Hedge Funds - The New York Times)</p>
<p>SEC seems to be saying that insider trading is epidemic in the Hedge Fund industry. I would hope that University Endowments have policies in place that requires them to withdraw their investments from firms like SAC that don’t seem to be getting superior results the old fashioned way.</p>
<p>My opinion is the authorities want to get Steven Cohen. That would be the prize catch.</p>
<p>It looks like there could be obstruction of justice issues…even if the insider trading charges don’t stick…</p>
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<p>Well, yes, but . . . The list you provided tells us which endowments took the biggest hit over a 2-year period in and immediately after the Great Recession. It doesn’t tell us which endowments showed the greatest net growth over a longer time frame, say the last decade. It could be that some relatively stodgy investors missed out on the big run-ups in endowment values experienced by the high-flyers, and then took a smaller hit during the downturn—but still did less well netting everything out over a 10-year period.</p>
<p>The list also doesn’t exactly tell us who had the best investment performance, because it’s based on the net change in endowment value. That depends only in part on investment performance. I’d assume most schools take a pretty similar payout of their endowment to support operations, generally in the 3.5-5% range based on a 3-, 5-, or 7-year moving average of asset value. But there are significant variations across schools, and at any given school from year-to-year, in contributions to the endowment. Schools successfully conducting major capital campaigns during this period might mask poor investment performance with large infusions of new contributions, or make the endowment manger appear to be a brilliant investor when in fact it’s the president who’s a brilliant fundraiser. At schools with smaller endowments—and some of the endowments on this list are in the relatively modest $300-$400 million range—a single $30-$40 million gift can produce a 10% swing in endowment value, again masking investment losses or making the endowment manager look like an investment genius. Short-term figures like these need to be taken with a huge grain of salt.</p>
<p>SAC is well known as a very, very aggressive Hedge Fund. The thing is while Hedge Funds normally charge 2 and 20, SAC charges 3% management fee and 50% of profits. You just don’t get the kind of returns to justify that without being very, very aggressive. What I don’t think is right is that endowments of institutions that you would think would want to maintain a high standard of integrity and regularly preach to the rest of us about what we should do invest much their money with highly questionable financial organizations. I have yet to see one institution come out and demand that financial institutions clean up their act or they will use their influence and financial clout against them. I guess that’s because the school’s Boards are full of these financial guys, and in the case of many Ivy’s the guys committing the fraud are their graduates.</p>
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<p>Knock yourself out! Most of the info you are looking for is available if you comb through each of the 240 college’s financial reports. I’ve looked up the handful of schools I follow most closely, but I woud be more than interested in any additional data you come up with!</p>
<p>Dartmouth budget cutting one year later:</p>
<p>[TheDartmouth.com:</a> College sees budget results one year later](<a href=“http://thedartmouth.com/2011/02/09/news/budget]TheDartmouth.com:”>http://thedartmouth.com/2011/02/09/news/budget)</p>
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<p>Sorry, dad, I don’t have time to pore through 240 colleges’ financial reports, nor am I as expert as you in reading and interpreting those reports.</p>
<p>I did do something simpler: using NACUBO data, I compared the 25 largest endowments’ values in 2001 with their values in 2010, a 10-year period. (Actually 26 schools as Brown fell out of the top 25, replaced by NYU). As you’ll recall, 2001 was before the 2002 economic retraction (or maybe at its very onset), and 2010 of course was the first year of recovery from the recent severe recession. I wanted to see which of the large endowments had grown the most over that decade, even after the effects of the 2002 retraction and the Great Recession were felt. There’s remarkably wide variation:</p>
<p>School / 2001 value / 2010 value / % change</p>
<p>Top performers:
UVA / 1,686,625 / 3,906,823 / +131.6%
NYU / 1,118,300 / 2,370.000 / + 111.9%
Notre Dame / 2,829,914 / 5,234,841 / +85.0%
Northwestern / 3,256,282 / 5,945,277 / +82.5%
Michigan / 3,614,100 / 6,563,144 / +81.6%
Princeton / 8,359,000 /14,391,450 / +72.2%
Stanford / 8,249,551 / 13,851,115 / +67.9%
Penn / 3,381,848 / 5,668,937 / +67.6%
Chicago / 3,516,238 / 5,638,040 / +60.3%</p>
<p>Average performers:
Yale / 10,725,100 / 16,652,000 / +55.3%
Duke 3,131,375 / 4,823,572 / +54.0%
Harvard 17,950,843 / 27,557,404 / +53.5%
Columbia 4,292,793 / 6,516,512 / +51.8%
Vanderbilt 2,019,612/ 3,044,000 / +50.7%
Brown 1,434,212 / 2,155,330 / +50.3%
Texas 9,363,588 / 14,052,220 / +50.1%</p>
<p>Dogs:
Texas A&M 4,030,881 / 5,738,289 / +42.4%
Cornell 3,151,384 / 4,378,587 / +38.9%
USC 2,130,977 / 2,947,978 / +38.3%
MIT 6,134,712 / 8,317,321 / +35.6%
Johns Hopkins 1.695,150 / 2,219,925 / +31.0%
Dartmouth 2,414,231 / 2,998.302 / +24.2%
Rice 3,243,033 / 3,786,548 / +16.8%
U California 4,702.729 / 5,441,225 / +15.7%
Wash U 3,951,509 / 4,473,180 / +13.2%
Emory 4,315,872 / 4,694,260 / +8.8%</p>
<p>Median = +50.25%, Mean = +53.5%</p>
<p>Could be lots of things going on here. No doubt much of the growth in the top-performing group is simply due to aggressive fundraising, e.g., at rapidly-privatizing “public” institutions like UVA and Michigan that don’t get much state support anymore, or at NYU which never had much money in the past but is now aggressively capitalizing on its location and alumni base. Raise a billion at these schools and it has a much bigger impact than at Harvard or Yale, simply because they’re starting from a much smaller base. But notice that not all publics (e.g., the UC system) did as well, nor did many privates starting from as far back as NYU; so the performance of this group is impressive. As for the middle group, I guess they did OK; 50% asset growth over a decade is nothing to sneeze at, especially when the end of the decade includes jarring losses. On the other hand, the run-up in their endowments over this period is nowhere near as phenomenal as popular chatter on this topic would suggest. Harvard, Yale, and Columbia did about as well as the median for the entire group; they were clearly outpaced by Princeton, Stanford, Penn, and a bunch of Midwestern schools (Northwestern, Notre Dame, Michigan, Chicago) which must have not only raised new money but invested wisely. At the bottom end, some of these figures are astonishing: Emory up only 8.8%? Wash U (or WUSTL if you prefer) up only 13.2%? The University of California up only 15.7%? I’m dumbfounded. Either their fundraising was weak, or they invested poorly, or both. It’s not just the schools that had the biggest short-term losses in the last couple of years that deserve careful scrutiny; it’s also those that failed to grow their endowments over a longer 10-year stretch in which some of their competitors performed brilliantly.</p>
<p>Very good analysis. One other possible reason for not showing gains is spending too much of the endowment.</p>
<p>Rice U did a lot of building - just finished many large projects. Don’t know if that made a difference or not…</p>
<p>^ You raise an interesting point, anxiousmom. A college or university could do a lot of fundraising to support an aggressive building program, either expanding, replacing, or renovating its physical plant and paying cash for all or a significant part of it. That physical infrastructure is an important part of the institution’s total capital pool as well, but it doesn’t get counted in endowment which is just the funds it has to invest. A school that raises a lot of money and pays cash for physical plant improvements may appear to be less well off than a school that raises a like amount of money, adds that money to its endowment, issues bonds to pay for the physical plant improvements, and then pays debt service as part of its operating budget (in part out of the annual payout from its endowment). The latter school will have a bigger endowment but also higher operating costs; but in principle it seems the two schools are about as well off, it’s just that one has more financial investments and the other has more of its total capital tied up in its physical plant, and the one with the larger endowment is also carrying more debt so its financial resources net of debt should be about the same as the one that paid cash.</p>
<p>I have no idea how Rice manages its money, or indeed if any school pays for a large fraction of its construction costs in cash. The schools I’m most familiar with seem to be issuing bonds for construction projects all the time, but I have to admit I don’t follow their finances all that closely.</p>
<p>Thanks for the data, BClintonk.</p>
<p>Long before Olin was around Rice for many years offered free tuition to all its students due to its strong endowment. The cost of keeping up with the Jones’ of the University world changed that.</p>
<p>I always thought that the debt should be subtracted from endowment as some mortgage the future heavily while others pay cash for buildings.</p>
<p>American U., which has been on a continuing building spree, raises all funds for its new buildings outside its endowment (and, I believe, pretty much pays cash). (It helps to have the CEO or Chair of Goldman-Sachs, I forget which, as your Trustees Board Chair.)</p>
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<p>OK, makes sense to me. Can we get that information and create a new CC ranking of college/university financial strength, based on endowment less debt? The endowment figures alone seem to be misleading.</p>