Endowment Woes & Liquidity Issues at Top Colleges

Parents Forum
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<p>Props to the Williams College alumni blog for this Chronicle heads-up:
[Managing</a> the Ups and Downs of the Endowment Roller Coaster - Commentary - The Chronicle of Higher Education](<a href=“http://chronicle.com/article/Managing-the-UpsDowns-of/65558/]Managing”>http://chronicle.com/article/Managing-the-UpsDowns-of/65558/)</p>

<p>this is especially interesting since one of its authors is former Williams president, Morton Owen Schapiro and the article seems to be making not-so-veiled references to Williams’ predicament over the last two years</p>

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<p>After all that mumbo-jumbo about liquidity and cash-calls and borrowing to pay operating bills, Moodys gives Amherst a pass:
<a href=“https://www.amherst.edu/aboutamherst/news/news_releases/2010/07/node/206306[/url]”>https://www.amherst.edu/aboutamherst/news/news_releases/2010/07/node/206306&lt;/a&gt;&lt;/p&gt;

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<p>[Wall</a> Street’s great enablers: Pension funds and endowments - Street Sweep: Fortune’s Wall Street Blog](<a href=“Private Site”>Private Site)</p>

<p>Completely agree with premise of article–</p>

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<p>That means that Amherst must be making a new bond debt offering. I’ll see if I can find the info yet.</p>

<p>Nope. Can’t find anything. Moody’s had changed Amherst from Aaa “stable outlook” to Aaa “negative outlook” back in 2009. “Negative outlook” means that a downgrade from Aaa would be possible. We are talking pretty rarified air. I believe there are only six liberal arts colleges rated Aaa by Moodys:</p>

<p>Amherst
Berea
Grinnell
Pomona
Swarthmore
Wellesley</p>

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<p>Really? That’s sort of a silly thing to say. How about: Interest rate and yield curve changes? Marketability discount based on low volume? Lack of demand based on anticipation of new issue?</p>

<p>If Freescale was really insolvent, its bonds would be trading at a yield much, much higher than 15%, and it wouldn’t be selling $750M new debt at 10.25%.</p>

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<p>BTW, a couple of Ivys did get downgraded from Aaa to Aa1 recently. I’m too lazy to go look it up, but I know Dartmouth was downgraded.</p>

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<p>interesting article on college spending allocations, but nothing we didn’t already know:</p>

<p><a href=“http://www.nytimes.com/2010/07/10/education/10education.html?src=me&ref=general[/url]”>http://www.nytimes.com/2010/07/10/education/10education.html?src=me&ref=general&lt;/a&gt;&lt;/p&gt;

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<p>JHS… 10.25 percent?</p>

<p>That is nothing to brag about. </p>

<p>May not be bankrupt rates…but these days…those are very high rates.</p>

<p>“Really? That’s sort of a silly thing to say. How about: Interest rate and yield curve changes? Marketability discount based on low volume? Lack of demand based on anticipation of new issue?”</p>

<p>I don’t think the above flies either.</p>

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<p>[Yale</a> Daily News - 250 staff laid off since May](<a href=“http://www.yaledailynews.com/news/university-news/2010/07/09/250-staff-laid-may/]Yale”>http://www.yaledailynews.com/news/university-news/2010/07/09/250-staff-laid-may/)</p>

<p>June ends another year for endowments. Things were going pretty good until May and June hit.</p>

30

<p>[FT.com</a> / Companies / Financial Services - Buy-out study queries performance](<a href=“Buy-out study queries performance | Financial Times”>Buy-out study queries performance | Financial Times)</p>

<p>Brilliant article. IMHO opinion brings up great points-points that for whatever reason rarely see the light of day in american print.</p>

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<p>@sm74: That article is for members only. I know we can register for free and all that, and maybe that’s the correct protocol. </p>

<p>But, since you said it’s a brilliant article, could you at least tell us a bit more about what it says before we all go typing in our dobs and favorite passwords and all that?</p>

32

<p>Sorry about that. The article summarized the findings of an independent think tank that questioned the true performance of PE investments over the past 20 years.</p>

<p>One quote, "the report’s author, Peter Morris, a former Morgan Stanley banker, cites an analysis of 542 recent buy-out deals in the portfolio of Yale University’s endowment, which after stripping out the impact of extra debt, under-performed the stock market by 40%.</p>

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<p>PE and VC…not looking good these days…</p>

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<p>[New</a> Report Asks: ‘Private Equity, Public Loss?’ - DealBook Blog - NYTimes.com](<a href=“DealBook - The New York Times”>DealBook - The New York Times)</p>

<p>This is the NYTimes summary of the study-also includes a link to the actual study.</p>

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<p>Dartmouth ends the year with a surplus:</p>

<p>[TheDartmouth.com</a> | Dartmouth ends year with surplus](<a href=“http://thedartmouth.com/2010/07/23/news/surplus]TheDartmouth.com”>http://thedartmouth.com/2010/07/23/news/surplus)</p>

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<p>@sm74: thanks, those are some interesting numbers, to say the least</p>

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<p>Thanks sm74.</p>

<p>Coureur…that is better news for Dartmouth.</p>

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<p>[THE</a> PROPERTY REPORT: CIC Seeks Harvard’s U.S. Real-Estate Portfolio - WSJ.com](<a href=“THE PROPERTY REPORT: CIC Seeks Harvard's U.S. Real-Estate Portfolio - WSJ”>THE PROPERTY REPORT: CIC Seeks Harvard's U.S. Real-Estate Portfolio - WSJ)</p>

<p>A couple of things struck me in this article-says some RE funds have been selling at an 80% discount to NAV-ouch. Also points out some very hefty Harvard investments in some not so golden funds-really makes you wonder how sharp the folks were that were making these investments, and it makes you wonder about the quality of their other investments. Net-net clearly Harvard is still aggressively trying to get some cash out of their illiquid investments.</p>

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<p>[Harvard</a> University fund sells all Israel stocks - News](<a href=“Palestine Note”>http://palestinenote.com/cs/blogs/news/archive/2010/08/15/harvard-university-fund-sells-israel-all-stocks.aspx)</p>

<p>Interesting development in the endowment.</p>

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<p>Harvard’s equity holdings reduced by 18% in the second quarter. They also deny having divested their Israeli holdings:</p>

<p>[Harvard’s</a> Second Quarter Equity Holdings Reduced 18 Percent | The Harvard Crimson](<a href=“http://www.thecrimson.com/article/2010/8/16/million-harvards-quarter-13f/]Harvard’s”>Harvard's Second Quarter Equity Holdings Reduced 18 Percent | News | The Harvard Crimson)</p>