<p>So Dartmouth makes a $100Million committment to this guys PE fund. The guy is guaranteed 10 years at 2% or $20Million regardless of how well the fund does then if he does ok he gets an additional 20% of the profit. Lo and behold 3 years later he makes a $5Million gift and gets a seat on the investment committee. Looks like a win-win-win for the PE guy, and the President of the University looks good getting a $5Million gift. Only bad news is that the PE guy bought a ton of bad investments during the 2006-08 bubble which the Pe guy is still sitting on and is causing the endowment liquidity headaches.</p>
<p>Well…sm74, when you write it like that…it almost makes sense to do what Dartmouth did… :)</p>
<p>The obvious question for me is So Dartmouth has 88% of its endowment invested in illiquid, non-transparent tier 2 and 3 assets–Do you think the fact that the Board is heavily represented with managers of tier 2 and 3 funds that charge high management fees has something to do with that?</p>
<p>Uhhhhhhh…yes. :)</p>
<p>People act in their own self interests…which might conflict with others…</p>
<p>Money managers and trustees should not be the same people.</p>
<p>Let’s see…</p>
<p>We are looking for a money manager. Who should I pick?</p>
<p>Me.</p>
<p><a href=“Betrayed by Madoff, Yeshiva University Adds a Lesson - The New York Times”>Betrayed by Madoff, Yeshiva University Adds a Lesson - The New York Times;
<p>Example of what can and has happened when a College invests with a Board member.</p>
<p>The madoff story is not a high point.</p>
<p>[Dartmouth</a>, Brown lead Ivies in investing with trustees | Reuters](<a href=“http://www.reuters.com/article/2012/05/31/us-dartmouth-endowment-survey-idUSBRE84U1AI20120531]Dartmouth”>http://www.reuters.com/article/2012/05/31/us-dartmouth-endowment-survey-idUSBRE84U1AI20120531)</p>
<p>Dartmouth and Brown lead the ivies in something. Pretty embarrassing that so many of these “prestigious” schools don’t understand why they shouldn’t be doing this.</p>
<p>Great article.</p>
<p>[Hazard</a> for Private-Equity Investors: ‘Zombie Funds’ - WSJ.com](<a href=“Hazard for Private-Equity Investors: 'Zombie Funds' - WSJ”>Hazard for Private-Equity Investors: 'Zombie Funds' - WSJ)</p>
<p>Excellent front page article in today’s WSJ on zombie PE funds. Another example of how the PE contract screwed the investor at nearly every turn. The fact that the fund can hold onto failed investments, the fund can essentially get rid of all their staff, and then the fund manager can continue to collect their 2% management fee and the investor can’t do anything about it is not a good situation. Comments about PE valuations support what has been said here before-managers have every reason to inflate their valuations and investors have no incentive to challenge those valuations.</p>
<p><a href=“South Carolina’s Pension Push Into High-Octane Investments - The New York Times”>South Carolina’s Pension Push Into High-Octane Investments - The New York Times;
<p>Interesting behind the curtain look at how alternative investment managers operate.</p>
<p>[Why</a> the Yale endowment model may still be fundamentally flawed | RIABiz](<a href=“http://www.riabiz.com/a/13639069]Why”>Why the Yale endowment model may still be fundamentally flawed | RIABiz)</p>
<p>Couldn’t agree more-most Universities are more exposed today than 4 years ago to market instability. A few like Harvard are working on making their endowments less risky but most are sitting idly by and hoping another 2008 doesn’t happen.</p>
<p>Everyone is in the same boat…and they are trapped. There is no one else to sell to at prices that won’t require taking significant losses. They are where they are, and there is no one else to come to the rescue. This is true of lots of pension funds too. </p>
<p>If you look at recent market actions, it strongly suggests we are facing a worldwide deflation. No one is set up for this.</p>
<p>One of the problems with the financial modeling is that people can lose sight of the fact that it is simply a mathematical or logical model of human behaviour. In the end, what you own is either a business (equities), a promise (debt, preferred, derivatives, options, etc.) or assets (gold, timber, commodities). Businesses are only as good as their products or services, and the customers ability to buy them. Promises are only as good as the businesses or governments that make them. Assets are only as good as your ability to possess them, and the demand for them. When one of these things breaks down, the models collapse.</p>
<p>Buffetts views on investing are the most sound. He doesn’t believe in models, and he doesn’t believe in diversifying to allay risk. He handles that with the original decision on what to invest in.</p>
<p>Two more Ivies borrowing big-Dartmouth and Brown each borrowing about another $150M.</p>
<p>Any links on these borrowing issues, sm74?</p>
<p>Dadx… I agree with you on the financial modeling issues.</p>
<p>[Moody’s</a> assigns Aa1 rating to Brown University’s (RI) $140 million of Series 2012 Revenue Bonds and affirms outstanding ratings; outlook is stable](<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>[Moody’s</a> assigns Aa1 rating to Dartmouth College’s (NH) $150 million of taxable revenue bonds, 2012 Series B; outlook is stable](<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>Little more color on Dartmouth/Brown:</p>
<p><a href=“Josh Humphreys on Dartmouth Endowment Practices - YouTube”>Josh Humphreys on Dartmouth Endowment Practices - YouTube;
<p>Sm74…</p>
<p>Those are great links. Thanks.</p>
<p>Aa1 are pretty strong ratings…second highest…</p>
<p>The rates Dartmouth and Brown are borrowing at must be very low…</p>
<p>I hope the borrowing rates were fixed rate! :)</p>
<p>[PA</a> pension to reduce ‘alternative’ investments, add stocks](<a href=“http://www.philly.com/philly/blogs/inq-phillydeals/PA-pension-to-sell-hedge-buyout-funds-buy-stocks-bonds.html]PA”>PA pension to reduce 'alternative' investments, add stocks)</p>
<p>Foray into alternative assets not working out too well in Pennsylvannia-bit of a liquidity problem. Universities can still borrow to create liquidity-places like Pennsylvannia running out of borrowing room.</p>
<p>Interesting article on Wesleyan’s CIO for the past two years; she’s a Swenson protege who still hews closely to the Gospel, but with caveats like this:
[[Wesleyan</a> Magazine Issue 2 2012] - Powered by PageTurnPro.com](<a href=“http://www.pageturnpro.com/Wesleyan-University/40687-Wesleyan-Magazine-Issue-2-2012/index.html#/36][Wesleyan”>http://www.pageturnpro.com/Wesleyan-University/40687-Wesleyan-Magazine-Issue-2-2012/index.html#/36)</p>
<p>Wesleyan’s endowment has traditionally lagged behind such small eastern colleges as Amherst and Williams (there was a relatively brief period in its history when it was the richest college in the country, but that was in the sixties) and recognizes that is probably the main drag on its USNews rankings. Since Martin has taken office, it has taken steps to redirect funds formerly used for operating expenses into the endowment. Most recently, it has announced plans to temporarily become “need-aware” for financial aid (nearly a third of its operating budget is spent on tuition discounting) and for this has received commendations from the ratings industry: [Moody’s</a> Positive On Wesleyan’s Tuition Policy Shift - Courant.com](<a href=“s – Hartford Courant”>http://www.courant.com/business/hc-wesleyan-tuition-moodys-20120611,0,4914198.story)</p>
<p>Wesleyan is currently in the silent phase of a capital campaign which for only the second time since World War II will be devoted entirely to raising the endowment.</p>