<p>Dartmouth is reporting 10% investment return. At least they beat Yale!</p>
<p>[Debt</a> forces Harvard back to drawing board - The Boston Globe](<a href=“http://www.boston.com/business/articles/2010/09/28/debt_forces_harvard_back_to_drawing_board/]Debt”>http://www.boston.com/business/articles/2010/09/28/debt_forces_harvard_back_to_drawing_board/)</p>
<p>Interesting article detailing how Harvard’s debt binge is impacting their expansion plans. Says Harvard has told bond raters that they will limit future debt to 1B over next 3 years which I think helps explain why they have been very aggressive in selling their illiquid investments in the secondary market. From what I have seen they have been far more aggressive than other Universities in the secondary market.</p>
<p>“Princeton University borrowed $1 billion in January 2009 at a rate as high as 5.7 percent to fund operating expenses and expects to spend all the money by the end of this year, according Emily Aronson, a spokeswoman. She declined to elaborate. The school, in Princeton, New Jersey, last year postponed $695 million in construction projects as it sought to close a budget gap.”</p>
<p>Interesting comment from Princeton which suggests that liquidity is still a problem.</p>
<p>
</p>
<p>The Samuel Hayes, Harvard investment banking prof emeritus, quoted in the Boston Globe article has been the head of the investment commitee on Swarthmore College’s board for many years. He just stepped down.</p>
<p>I don’t know what’s going to happen with stalled building projects. Moody’s and S&P have clearly sent a message that bond ratings will be hurt by borrowing. There is nothing going on in college bond issues. Williams made some vague comments about hopefully restarting the postponed library project “next spring”, but I have no idea what that means in terms of financing it. I can’t imagine that Moody’s would applaud a $100 million bond issue.</p>
<p>[Randomly</a> Noted Blog Archive To Make Private Equity Work, You Need Ones With Right Stuff](<a href=“無効なURLです”>無効なURLです)</p>
<p>Kind of flies in the face of what the Swenson model, and most endowments, is all about.</p>
<p>[Harvard</a> Learns a Lesson - Bloomberg](<a href=“Bloomberg - Are you a robot?”>http://www.bloomberg.com/news/2010-09-28/harvard-learns-a-lesson.html)</p>
<p>Good story on how Jane Medillo is managing the Harvard Endowment.</p>
<p>[Hedge</a> fund D.E. Shaw makes staff cuts -source | Reuters](<a href=“Hedge fund D.E. Shaw makes staff cuts -source | Reuters”>Hedge fund D.E. Shaw makes staff cuts -source | Reuters)</p>
<p>Article about DE Shaw raises question about Hedge funds still limiting investor withdrawals. Hard to understand 2 years after the crises ends why hedge funds are still limiting quarterly withdrawals. For heavily tier 3 invested endowments, hedge funds are the most useful form of liquidity but it seems that there is still a big problem there.</p>
<p>It’s not as if this was unexpected. Amherst managed to soldier on following heavy investment losses and borrowing to avoid realizing even greater losses to its endowment, but, some of its talk in the months following sounded a tad like it was whistling past the graveyard. So, the only question here is, did he jump or was he pushed?: [Amherst’s</a> Marx to Resign for New York Library Post - BusinessWeek](<a href=“Bloomberg - Are you a robot?”>Bloomberg - Are you a robot?)</p>
<p>[Faculty</a> of Arts and Sciences proceeds toward a capital campaign | Harvard Magazine](<a href=“http://harvardmagazine.com/breaking-news/fas-progress-plans]Faculty”>http://harvardmagazine.com/breaking-news/fas-progress-plans)</p>
<p>Interesting update on Harvard’s financial condition. No more debt and sounds like a big fundraising campaign coming.</p>
<p>[D.E</a>. Shaw Struggles With New Mexico Bet - WSJ.com](<a href=“D.E. Shaw Struggles With New Mexico Bet - WSJ”>D.E. Shaw Struggles With New Mexico Bet - WSJ)</p>
<p>Interesting story about one of the 10 largest hedge funds. Illustrates one reason why liquidity has become such a problem-the area where endowments were supposed to be able to access cash,hedge funds-were increasingly becoming private equity funds buying very illiquid assets. Other thing I find interesting is that once again this is the story of an Ivy League professor who felt he could outsmart the market. </p>
<p>For another case of hedge fund hubris and making a massive illiquid bet check out Harbinger.</p>
<p>One other interesting tid-bit. None other than Larry Summers left Harvard(and it’s endowment in a shambles) in 2006 and worked for of all companies DE shaw for 2 years and made over $5million before going to work for Obama. Man, that guy is toxic.</p>
<p>[Financial</a> Administration - Annual Financial Report of Harvard University](<a href=“http://vpf-web.harvard.edu/annualfinancial/]Financial”>http://vpf-web.harvard.edu/annualfinancial/)</p>
<p>Harvard has issued their annual report. A couple of things struck me:</p>
<p>-On the income side the biggest net plus was an additional $63M in research money from the federal government. Good to see that the recovery act money is going to places like Harvard that are in real need.</p>
<ul>
<li>On the endowment side while Harvard claims that things are greatly improved I really don’t see it. Investment assets are $36.5M from $36.4M in 2009.
<ul>
<li>It looks like tier 1 liquid assets improved from $6m to $10M but in fact what Harvard did was a bunch of re-classifications. If you back those out it actually seems to me that liquid assets declined by $2B which is the amount short-term investments declined which was from $4B to $2B. Says to me they used up $2B worth of liquidity.</li>
<li>They reclassified half of their tier 3 $5.2B in absolute funds(hedge funds) to tier 2 citing that those funds can be accessed within 12 months. But that means that over half of their hedge fund assets are illiquid which seems like alot.</li>
<li>Finally they invested a net additional $676M in real assets which seems like a heckovalot.</li>
</ul></li>
</ul>
<p><a href=“http://harvardmagazine.com/breaking-news/harvard-annual-financial-report-released[/url]”>http://harvardmagazine.com/breaking-news/harvard-annual-financial-report-released</a></p>
<p>Harvard magazine’s take</p>
<p><a href=“Financial Management | It's Your Yale”>Financial Management | It's Your Yale;
<p>Yale released its 09-10 financial statements.</p>
<p>On the income statement, Yale like Harvard was bailed out by the federal gov’t with 50M+ in additional grants. It must be frustrating for less wealthy LAC’s to see mega-wealthy schools like Yale and Harvard getting so much of the shovel ready money.</p>
<p>The endowment is pretty much where it was last year. Looks like they met their cash needs by taking $800M out of their liquid hedge funds which is consistent with what we have heard about hedge fund withdrawals the past year, and a net $700M in extra debt. Still looks like its hard to get much cash out of their private equity investments.</p>
<p>Net-net I don’t see much improvement in liquidity. Private equity needs to start dishing out some cash as I’m not sure Yale can continue much longer issuing debt and cashing in hedge funds.</p>
<p>[Private</a> Equity Firms Reap Big Fees, Report Says - NYTimes.com](<a href=“DealBook - The New York Times”>DealBook - The New York Times)</p>
<p>Raises some interesting issues about PE. Says since 1995 PE has raised $179B but only distributed back $113B.</p>
<p>^sm74: “One other interesting tid-bit. None other than Larry Summers left Harvard(and it’s endowment in a shambles) in 2006 and worked for of all companies DE shaw for 2 years and made over $5million before going to work for Obama. Man, that guy is toxic.”</p>
<p>And I think he is going back to Harvard after resigning from Obama’s administration.</p>
<p>“$63M in research money from the federal government. Good to see that the recovery act money is going to places like Harvard that are in real need.”</p>
<p>research money is supposed to go to places that do the best, most relevant research, based on their grant proposals. Each fed agency doing research has its own goals and criteria, IIUC. I have never heard that they are supposed to prioritize small or financially weak research institutions. </p>
<p>To the extent that there is a stimulus motivation for additional research money, the concern would be making sure that employment is stimulated. A Boston area person getting a job on a research grant probably doesnt much care whether its at Harvard, Tufts, Simmons, or UMass Harbor Campus.</p>
<p>[Harvard</a> issues bonds to refinance debt and pay for capital projects | Harvard Magazine](<a href=“http://harvardmagazine.com/breaking-news/back-to-the-bond-market]Harvard”>http://harvardmagazine.com/breaking-news/back-to-the-bond-market)</p>
<p>While the Ivy’s are all putting a smily face on their endowments here we have Harvard needing to borrow a bunch more money-if things are going so great why do you need to borrow so much money-doesn’t add up to me. Would expect Yale to need announce some more borrowing as well.</p>
<p>[Penn</a> Evaded Harvard Losses With `Defensive’ Fund, Marks Says - Bloomberg](<a href=“Bloomberg - Are you a robot?”>Bloomberg - Are you a robot?)</p>
<p>Very good perspective from the head of the Board that oversees the Penn endowment. Why Penn’s endowment is in good shape now and why Yale and Harvard still have a long way to go before they are in the clear.</p>
<p>[Salovey</a> still constrained by budget | Yale Daily News](<a href=“http://www.yaledailynews.com/news/2010/nov/04/salovey-still-constrained-by-budget/]Salovey”>http://www.yaledailynews.com/news/2010/nov/04/salovey-still-constrained-by-budget/)</p>
<p>Example of Yale continuing to be constrained by their endowment</p>
<p>^^I must say, higher education represents a very strange business model. What other sector of the economy can increase its product by 25% with little or no regard for demand (i.e., enrollment?)</p>