<p>[UP</a> CLOSE | How have budget cuts hurt us? (and could we have cut differently?) | Yale Daily News](<a href=“http://www.yaledailynews.com/news/2011/apr/19/close-how-have-budget-cuts-hurt-us-and-could-we-ha/]UP”>http://www.yaledailynews.com/news/2011/apr/19/close-how-have-budget-cuts-hurt-us-and-could-we-ha/)</p>
<p>Yale still struggling mightily from their endowment woes.</p>
<p>[Hedge</a> funds have $100 billion still locked up | Compliancex](<a href=“http://compliancesearch.com/compliancex/hedge-funds/hedge-funds-have-100-billion-still-locked-up/]Hedge”>http://compliancesearch.com/compliancex/hedge-funds/hedge-funds-have-100-billion-still-locked-up/)</p>
<p>Good news from Endowments is that Duke and Harvard actually bought back some of their debt. Bad news is that there are still plenty of problems to sort out in their hedge fund and private equity holdings.</p>
<p>Dartmouth has closed the gap. Reports the first budget surplus since the troubles began:</p>
<p>[TheDartmouth.com:</a> College releases budget details](<a href=“http://thedartmouth.com/2011/05/23/news/budget]TheDartmouth.com:”>http://thedartmouth.com/2011/05/23/news/budget)</p>
<p>It appears many endowments are now back were they were around the peak prior to the market bust. Michigan and UVa for example.</p>
<p>[UVa</a> endowment bounces back from steep losses | Daily Progress](<a href=“http://www2.dailyprogress.com/news/2011/may/21/uva-endowment-bounces-back-steep-losses-ar-1055668/]UVa”>http://www2.dailyprogress.com/news/2011/may/21/uva-endowment-bounces-back-steep-losses-ar-1055668/)</p>
<p>Interesting read of how Dartmouth has managed to close its gap…one change–reinstating loans for those families making more than $75K. They couldn’t afford to keep up with the Joneses (HYP).</p>
<p>Would agree that most endowments are past the point of worrying about having the liquidity to make their annual contributions to the operations of their colleges. I still think Yale and Princeton have alot of work to do and Harvard is not completely out of the woods.
Most other endowments did not take the level of risks that these did and have recovered more quickly.
I still believe virtually all endowments still need to write down the value of their tier 3 private equity and hedge fund assets. A large portion of endowment hedge fund assets are locked-up in side pockets(because they represent investments in illiquid often questionable companies)-on the secondary market those are getting between 10cents on the dollar and 50cents. As evidenced by all the hedge fund managers going to jail lately the hedge fund industry is very, very risky.
In private equity I have been surprised at some of the companies that have actually been able to get their money back through IPOs. I never would have thought a sorry company like Freescale would have been able to go public but it looks like it is. Its testament I guess to the power of some of the larger PE companies.
Still there are many PE companies that have assets that are virtually worthless that endowments have not written down. Many real estate PE companies that invested heavily in 2005-2007 will never recover. The way PE works is that the endowment when they sign up to committ funds committ to atleast 10 years of 2% management fees unless and until the investment is sold or goes bankrupt. Many of these real estate companies are keeping their assets on life support to keep their 2% fees coming in.
Write downs will come but not until the 2% management fee expires.
Net-net, as long as the market and economy holds up I think the endowments will be fine, but with another shock I believe you will find that the endowments will have liquidity problems even greater than they experienced in 2008.</p>
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<p>It’s pretty amazing how much volatility even the slightest modification in financial aid adds to the budget process. Even though it won’t show up on most balance sheets as an expense (because it is posted on the income side of the ledger as a tuition discount) nearly every elite school had to walk back generous no-loan packages or need-blind aid to internationals that seemed perfectly plausible and affordable only a few years ago.</p>
<p>johnW I think the other thing you are seeing is that large donors are having more influence on admission decisions than they have in recent memory. Larry Summers thought his endowment was large enough that he could do what he wanted without worrying about donors at Harvard-that line of thought has changed pretty dramatically.</p>
<p>^^Indeed it has: [Mad</a> Men MoCon: Matthew Weiner ’87 Weighs In – Wesleying](<a href=“http://wesleying.org/2010/02/21/mad-men-mocon-matthew-weiner-87-weighs-in/]Mad”>Mad Men MoCon: Matthew Weiner ’87 Weighs In | Wesleying)</p>
<p>Next week CNBC’s noon show will feature a different endowment manager each day. What’s interesting is schools represented which include Texas, Purdue, ND but no Harvard or Yale. Can’t believe CNBC didn’t contact Harvard or Yale, and I’ve never known the Yale guy to turn down an opportunity to tell the world how smart he is. Anyway, will be interesting to hear what they say.</p>
<p>[Alice</a> Handy Enables Smith to Crush Harvard With Perennial Endowment Return - Bloomberg](<a href=“Bloomberg - Are you a robot?”>Bloomberg - Are you a robot?)</p>
<p>[Yale-Backed</a> Hillhouse Sees China Slowdown After Fund Climbs 6.8%](<a href=“http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2011/06/03/bloomberg1376-LM4HPF07SXKX01-4H7KKT13C6ECFALL5TN7KKVE3A.DTL]Yale-Backed”>http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2011/06/03/bloomberg1376-LM4HPF07SXKX01-4H7KKT13C6ECFALL5TN7KKVE3A.DTL)</p>
<p>Interesting story on alot of levels. Mr. Zhang donated $8,888,888 to Yale’s management school, what was not mentioned at the time was that he had received $34,000,000 from Yale that same year because of his hedge fund’s performance. Demonstrates just how much influence hedge fund and Private equity guys have now with elite colleges-that is where the big money is.</p>
<p>Mr. Zhang is Yale’s go to guy in China-and based on his renumeration must be managing something near $500Million for Yale. With the meltdown now happening in the markets in China one wonders how this will turn out for Yale.</p>
<p>[Princeton</a> Borrowing as Capital Spending Recovers: Muni Credit](<a href=“http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2011/06/14/bloomberg1376-LMSPQI0UQVI901-255OR2JU9S8CRUMHAOGTER4D1S.DTL]Princeton”>http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2011/06/14/bloomberg1376-LMSPQI0UQVI901-255OR2JU9S8CRUMHAOGTER4D1S.DTL)</p>
<p>Not positive news for Princeton. While Harvard and Duke are redeeming debt Princeton is still issuing new debt.</p>
<p>In Moody’s filing Princeton says endowment is up 14.7% thru first 3 quarters. Given market problems this quarter looks like endowments will be reporting around 10% growth this year.</p>
<p>Interesting that Moody’s cites Princeton’s $2.7Billion dollar capital improvements and says 2/3rds will be paid with debt-not contributions.</p>
<p><a href=“http://web.mit.edu/newsoffice/2011/bond-sale-0511.html[/url]”>http://web.mit.edu/newsoffice/2011/bond-sale-0511.html</a></p>
<p>MIT also reporting very large TAXABLE borrowing. All is still not great out their in endowment land.</p>
<p>Back-to-back years of positive return on their endowments and these places are ready to spend money they didn’t have just two years ago. Tuition will probably also go up in tandem with the overhang from the new debt. Is this a great country or what?</p>
<p>[aiCIO</a> - Cornell Endowment Rocked by Another Resignation](<a href=“http://www.ai-cio.com/channel/NEWSMAKERS/Cornell_Endowment_Rocked_by_Another_Resignation.html]aiCIO”>http://www.ai-cio.com/channel/NEWSMAKERS/Cornell_Endowment_Rocked_by_Another_Resignation.html)</p>
<p>Alot of endowment heads leaving. Article suggests Cornell departure was not pretty. Stanford CIO also recently departed.</p>
<p><a href=“IRR may overstate PE returns”>IRR may overstate PE returns;
<p>One more study calling into question Private Equity returns which represent 50% or more of virtually all of the largest endowments. Like Hedge funds the ones making out like bandits end up being the hedge fund manager and the PE manager. Meanwhile Cornell is touting its 17% return for the year ending June 30, 2011 when putting your money in a low risk, completely liquid Vanguard S&P Index fund would have gotten them 30% plus a 2% dividend.</p>
<p>I missed this story but MIT is borrowing money for 100 years…I think that is a pretty good rate for MIT for a 100 year bond…</p>
<p>I think this is a very good deal for MIT…</p>
<p>Callable too…although I can’t see these bonds called for 90 years…:)</p>
<p><a href=“Moody's - credit ratings, research, and data for global capital markets”>Moody's - credit ratings, research, and data for global capital markets;
<p>Amherst looking at possible downgrade of debt</p>
<p>[Harvard</a> endowment manager to retire, following shake-up - Boston Business Journal](<a href=“http://www.bizjournals.com/boston/news/2011/08/05/harvard-endowment-manager-to-retire.html]Harvard”>http://www.bizjournals.com/boston/news/2011/08/05/harvard-endowment-manager-to-retire.html)</p>
<p>The other reason might be that his largest position is Brazil which is down 25% this year.</p>
<p>I’m sure this week was not fun at any mgt firm–college or mutual fund.</p>