<p>I’d like PE to function like Richard Gere’s character in Pretty Woman. Rather than Michael Douglas’s Gordon Gekko, Wall Street. </p>
<p>Company that DS works for was bought out. Principles are retained and theoretically still run the place. The company doing well but was cash constrained. It needed deeper pockets to get to the next level and retain talent.</p>
<p>
</p>
<p>[MOODY’S</a> CONFIRMS AMHERST COLLEGE’S (MA) Aaa AND Aaa/VMIG1 DEBT RATINGS AND REMOVES RATINGS FROM WATCHLIST; OUTLOOK IS NEGATIVE](<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>
<p>Apparently, their January sale of variable rate bonds was successful and, if I had to guess, they probably haven’t had to use any of their $100,000,000 letter of credit to supplement the operating budget, which was one of the things which caused Moody’s to put them on their “watch list” over the summer.</p>
<p>Great time to borrow and make capital investments — if one only had business confidence!</p>
<p>[Harvard</a> Joins Groupon Investor to Finance Student Startups - Bloomberg](<a href=“Bloomberg - Are you a robot?”>Bloomberg - Are you a robot?)</p>
<p>[Weaning</a> Off ‘Alternative’ Investments - WSJ.com](<a href=“Weaning Off 'Alternative' Investments - WSJ”>Weaning Off 'Alternative' Investments - WSJ)</p>
<p>Great article in today’s WSJ. Guy recognizes that public employee pensions are playing with fire in going to alternaive investments. Not to mention the outrageous fees.</p>
<p><a href=“porkbun.com | parked domain”>porkbun.com | parked domain;
<p>The frustrating thing with PE is that it is so Private its hard to get a handle on whats really going on. But there are very good surrogates for what endowments are facing with their PE investments and that is publicly traded PE funds of funds. My favorite is Conversus capital (that was actualy started with help from Harvard).They issued a year end report that is extremely revealing:</p>
<p><a href=“http://www.conversus.com/images/20027/CCAP%2031%20December%20Investor%20Presentation%20Final.pdf[/url]”>http://www.conversus.com/images/20027/CCAP%2031%20December%20Investor%20Presentation%20Final.pdf</a></p>
<p>A couple of highlites:
pg. 4 -graph shows stock price versus NAV.With a current price of 19 it is trading at a 30% discount to NAV. In other words what the public is wiling to pay for a typical assortment of PEfunds is 30% less than what the PE funds say they are worth.</p>
<p>pg. 6 - Cash flow shows how dramatically the difference between money coming in is merging with money going out in calls. Important ratio here is the percentage of outstanding capital calls to fund value which is only 25% with Converus-with many endowments the ratio is closer to 50% so they are actually bleeding cash.</p>
<p>pg.13 - List other publicly traded PE funds of funds and all are trading at 30-50% discount to NAV. If you applied this discount to endowment value then you would see huge cuts in the value of endowments.</p>
<p>pg21 - list PE funds Conversus holds which is probably not all that different from endowments.</p>
<p><a href=“http://www.conversus.com/images/20027/CCAP_2011_12_31_Monthly_Report_Final(1).pdf[/url]”>http://www.conversus.com/images/20027/CCAP_2011_12_31_Monthly_Report_Final(1).pdf</a></p>
<p>Perfect illustration of what the South Carolina guy was saying about management fees. Conversus went public in 2007 at a price of $25, and today its tradng at $19. Yet Conversus is paying itself a bonus of $52.2M(3% of NAV). How can they do that- because bonus is paid on a 3 year rolling average of NAV so because its coming off its 2008 bottom they get a big bonus.</p>
<p>Also, the NAV as of 2nd quarter 2011 which reflects the most recent endowment year end is 30.02 The stock price is $19 which means the public market value is now 37% less.</p>
<p><a href=“Page not Found”>Page not Found;
<p>Annual ranking of endowment values</p>
<p>Among other observations, I’m surprised that Pitt’s endowment exceeds that of Brown.</p>
<p>We can trash the schools when they make poor decisions…but these endowments are getting healthier and healthier.</p>
<p>Stark, I would not agree that the biggest endowments are getting healthier. I think that other than the 3 or 4 months after the 2008 crash, they have never been in more trouble with the on-going issues of Liquidity and Valuation. Looking at the “reported” endowment values one has to wonder why Yale is expressing so much concern about budget and capital spending issues.</p>
<p>Well…we will see…</p>
<ol>
<li><p>Do some universities sometimes report endowments for their medical centers in with their educational endowments? </p></li>
<li><p>To make this comparison more useful, it should be reported as average endowment per full time equivalent student. Some other websites have reported that info in the past. A university with multiple campuses may appear to have a huge endowment, but it may be a fraction of the endowment per student of a smaller college with a much smaller endowment.</p></li>
<li><p>I’d love to see a ratio of endowment to debt. I know of some colleges that have a debt higher than their endowment. However, those debts can be skewed by bonds for hospital construction, housing or other services that generate net revenues.</p></li>
</ol>
<p>Low borrowing costs may explain why big endowment colleges carry so much debt. OTOH, it also sounds to me as if very little has changed since 2008; no matter how much these endowment "“values” have accrued over the last four years, the last thing any of these managers wants to do right now is to have to liquidate any significant portion of them.</p>
<p>Here are the 2010 endowment numbers for the top five LACs. The first column is per student endowment. The second column is net per student endowment (endowment minus debt):</p>
<p>
Pomona 2010 $1,107,788 $986,924
Swarthmore 2010 $998,982 $883,431
Grinnell 2010 $924,350 $846,974
Amherst 2010 $914,491 $740,232
Williams 2010 $856,603 $712,435
</p>
<p>[KKR’s</a> profit plunges on valuations - The Globe and Mail](<a href=“http://www.theglobeandmail.com/report-on-business/kkrs-profit-plunges-on-valuations/article2332476/]KKR’s”>http://www.theglobeandmail.com/report-on-business/kkrs-profit-plunges-on-valuations/article2332476/)</p>
<p>KKR Management fees strong, valuations big problem–guess how that affects their LP investors(endowments)</p>
<p>[SEC</a> looks into private equity industry practices: WSJ | Reuters](<a href=“http://www.reuters.com/article/2012/02/11/us-sec-private-equity-idUSTRE81A0JP20120211]SEC”>http://www.reuters.com/article/2012/02/11/us-sec-private-equity-idUSTRE81A0JP20120211)</p>
<p>PE Valuation issue is really heating up. I think we’ll see some examples of just how absurd some of the valuations are out there.</p>
<p>^^^ its about time !!!</p>
<p>[Private</a> Equity Industry Attracts S.E.C. Scrutiny - NYTimes.com](<a href=“http://dealbook.nytimes.com/2012/02/12/private-equity-industry-attracts-s-e-c-scrutiny/]Private”>Private Equity Industry Attracts S.E.C. Scrutiny - The New York Times)</p>
<p>NY Times adds more insight into what the SEC is looking at.</p>
<p>Top 10 Private Universities-Investments Net of Debt</p>
<ol>
<li>Harvard 31.7B</li>
<li>Stanford 18.3B</li>
<li>Yale 17B</li>
<li>Princeton 14.3B</li>
<li>MIT 9.7B</li>
<li>Duke 6.7B</li>
<li>ND 6.5B</li>
<li>Columbia 6.4B</li>
<li>NW 6.2B
10 Penn 6.1B</li>
</ol>