<p>Some interesting developments resulting from a consulting study at Calpers-one of the world’s largest pension funds.</p>
<p>They recommended not paying management fees to PE firms. Given that management fees represent about 90% of what PE firms are now getting(performance has been so bad they haven’t earned performance fees) this would be pretty dramatic. This takes aim at the abuses that are clearly going on now with management fees.</p>
<p>They are also recommending that Calpers significantly reduce their exposure to hedge funds and Private Equity. Interesting given that endowments have been and continue to go the opposite way.</p>
<p>Looks like endowments are clearly scrambling to get out of all these hedge funds attached to the insider trading scandal before things blow up. I think Gasparino mentions major college endowment 15 times in this piece.</p>
<p>Interesting comments on 2010 PE exits(or lack thereof):</p>
<p>“in contrast to their experience in China, pe groups have not been able to take many of their US companies public and return cash to their investors…they have withdrawn 19 US companies from the listing queue…but they also had a longer unofficial IPO wish list. After the summer, for example, Morgan Stanley executives had a pipeline of 22 deals on which they were working with private equity firms, most of which never got very far…if PE firms cannot cash-out of heir holdings and return money to their investors, they cannot boast of a track record and raise new money.”</p>
<p>I give Stanford credit for being creative in reducing costs. I wonder what using last year’s cover for the annual report saved them.</p>
<p>Otherwise, seems that like the other high-profile, connected Universities Stanford was saved by a sizeable increase in research funds from the US taxpayer.</p>
<p>Very good NYTimes article on the subjectivity of PE valuations, and the incentives in place that cause many PE funds to be very optimistic with their valuations. Given that many colleges have 70-80% of their endowment in private investments one really has to wonder what the true value is of some of these endowments.</p>
<p>the succeeding Financial institutions to Wachovia, Countrywide, Washington Mutual, Merrill, BearS. and Lehman, are still choking and giving me a heartburn.</p>
<p>Hmmm. What a surprise. The Yale Prez “forgot” to mention that Yale’s 8.9% endowment return was the worst performance of any elite college or university I’ve seen so far this year.</p>
<p>LP’s(endowments) begging to get their money back. If distributions aren’t much better in '11 you have to wonder if they will ever get some of their money back from PE companies.</p>
<p>There seems to be a fair amount of gamesmanship or more charitably variances in how U’s seperate out Endowment funds from total manageable assets. Most U’s endowment assets used for the NACUB study are about 80% of manageable assets. For example Harvard reports endowment assets of 27.6B but has 33.3B in manageable assets. Princeton, however, reports endowment assets at $14.4b but manageable assets of $13.9B. If NACUB is attempting to determine the financial health of Universities and comparing one to the other I think it would be more appropriate to look at manageable assets and debt. Based on that measure Princeton would fall behind Texas and Stanford.</p>
<p>Thanks for the NACUBO links! Here’s a down and dirty list of the ~240 or so schools with the largest endowments and the **two-year **change in their endowments, from June 30, 2008 to June 30, 2010. This covers the market crash and first year of recovery and reflects investment performance, endowment spending distributions, and gifts to the endowment.</p>
<p>There is some serious financial bloodletting at the top of this list:</p>
<p>
-31.8% Haverford College PA
-28.5% Franklin W. Olin College of Engineering MA
-27.2% Yale University CT
-26.8% Baylor College of Medicine TX
-25.7% Union College NY
-24.6% Harvard University MA
-23.9% Southern Methodist University TX
-23.7% Carnegie Mellon University PA
-23.6% Yeshiva University NY
-23.6% Agnes Scott College GA
-23.5% Rhode Island School of Design RI
-23.2% Bates College ME
-22.7% Northeastern University MA
-22.7% Wesleyan University CT
-22.7% The Rockefeller University NY
-22.3% Rollins College FL
-22.1% Spelman College GA
-22.1% West Virginia University Foundation WV
-22.1% Drexel University PA
-21.6% University of Arkansas & Foundation AR
-21.5% Brown University RI
-21.4% College of the Ozarks MO
-21.2% Duke University NC
-21.1% Drew University NJ
-20.7% The Florida State University Foundation FL
-20.6% Rensselaer Polytechnic Institute NY
-20.6% Franklin and Marshall College PA
-20.6% Oklahoma State Regents for Higher Education OK
-20.5% Carnegie Institution of Washington DC
-20.3% Princeton Theological Seminary NJ
-20.2% The University of Maryland Foundation MD
-20.1% Willamette University OR
-20.1% DePauw University IN
-20.0% Worcester Polytechnic Institute MA
-19.9% Earlham College IN
-19.8% Louisiana State University System LA
-19.8% Oklahoma State University & Foundation OK
-19.7% Howard University Endowment DC
-19.6% Mount Holyoke College MA
-19.5% Stanford University CA
-19.5% Saint Louis University MO
-19.4% University of Cincinnati OH
-19.3% Pepperdine University CA
-19.3% Bradley University IL
-18.9% Wellesley College MA
-18.8% Amherst College MA
-18.7% Oberlin College OH
-18.7% Cornell University NY
-18.7% Pomona College CA
-18.4% Baylor University TX
-18.3% Wake Forest University NC
-18.3% California Institute of Technology CA
-18.1% Dartmouth College NH
-18.1% Loma Linda University CA
-17.9% Northwestern University IL
-17.9% The University of Tulsa OK
-17.9% University of Tennessee System TN
-17.9% Oregon State University Foundation OR
-17.9% Rice University TX
-17.8% University of South Florida Foundation FL
-17.8% Denison University OH
-17.7% Kansas State University Foundation KS
-17.7% University of Houston System & Foundation TX
-17.6% Gettysburg College PA
-17.5% Vassar College NY
-17.5% Hamilton College NY
-17.5% Georgia Tech Foundation GA
-17.4% Wabash College IN
-17.4% Massachusetts Institute of Technology MA
-17.4% The Principia Corporation MO
-17.4% Trinity University TX
-17.3% The College of Wooster OH
-17.2% Berea College KY
-17.2% Case Western Reserve University OH
-17.2% University of Connecticut & Foundations CT
-17.1% The University of Georgia Foundation GA
-17.0% Occidental College CA
-16.7% St. John's University NY
-16.6% University of Maryland College Park Foundation MD
-16.6% Lehigh University PA
-16.5% Rochester Institute of Technology NY
-16.4% Washington University in St. Louis MO
-16.4% Colby College ME
-16.3% Lebanese American University NY
-16.2% University of St. Thomas (MN) MN
-16.1% University of Rochester NY
-16.1% Reed College OR
-16.1% Tufts University MA
-16.0% University of Miami FL
-15.9% University of Notre Dame IN
-15.9% University of North Carolina at Chapel Hill & Foundations NC
-15.7% Loyola University New Orleans LA
-15.6% St. Olaf College MN
-15.6% Tulane University LA
-15.6% Williams College MA
-15.4% University of Iowa & Foundation IA
-15.4% Loyola University of Chicago IL
-15.4% College of the Holy Cross MA
-15.3% University of Washington WA
-15.3% Babson College MA
-15.1% Virginia Commonwealth University VA
-15.0% University of Chicago IL
-15.0% Wheaton College (IL) IL
-14.9% Lafayette College PA
-14.9% Fairfield University CT
-14.7% Davidson College NC
-14.6% University of Louisville Foundation KY
-14.5% Scripps College CA
-14.5% Fordham University NY
-14.5% Boston College MA
-14.4% University of Alabama System AL
-14.3% University of Kentucky KY
-14.2% Emory University GA
-14.2% Texas Christian University TX
-14.2% American University DC
-14.1% Grinnell College IA
-14.0% Miami University OH
-13.8% Southwestern University TX
-13.8% Texas A&M University System & Foundations TX
-13.8% Syracuse University NY
-13.7% Trinity College CT
-13.7% University of New Mexico & Foundation NM
-13.6% Bryn Mawr College PA
-13.6% University of Vermont VT
-13.4% Medical College of Wisconsin WI
-13.4% The Kansas University Endowment Association KS
-13.3% Boston University MA
-13.3% University of Michigan MI
-13.1% The University of Texas System TX
-13.0% Carleton College MN
-13.0% The University of the South TN
-12.9% Vanderbilt University TN
-12.9% Brandeis University MA
-12.9% University of Pittsburgh PA
-12.9% University of Oregon Foundation OR
-12.8% Villanova University PA
-12.7% Colgate University NY
-12.6% Loyola Marymount University CA
-12.5% University of California CA
-12.5% Whitman College WA
-12.4% Harvey Mudd College CA
-12.1% University of Mississippi Foundation MS
-12.1% Johns Hopkins University MD
-12.0% Princeton University NJ
-11.7% Macalester College MN
-11.7% University of Florida Foundation FL
-11.6% Claremont McKenna College CA
-11.6% Hampton University VA
-11.6% Swarthmore College PA
-11.5% Middlebury College VT
-11.5% The Pennsylvania State University PA
-11.4% University of Dayton OH
-11.4% Bucknell University PA
-11.3% Indiana University & Foundation IN
-11.3% Columbia University NY
-11.2% Ohio University & Foundation OH
-11.1% University of California San Diego Foundation CA
-11.0% Furman University SC
-11.0% Catholic University of America DC
-10.9% University of Southern California CA
-10.7% Santa Clara University CA
-10.6% University of Wisconsin Foundation WI
-10.5% University of Puget Sound WA
-10.5% Arizona State University & Foundation AZ
-10.3% Rhodes College TN
-10.3% Medical College of Virginia Foundation VA
-9.9% The Ohio State University OH
-9.8% DePaul University IL
-9.7% Dickinson College PA
-9.4% Creighton University NE
-9.4% University of South Alabama Foundation AL
-9.4% Bowdoin College ME
-9.3% Clemson University & Foundation SC
-9.2% Barnard College NY
-9.2% Iowa State University & Foundation IA
-9.0% Quinnipiac University CT
-9.0% The George Washington University DC
-8.9% Smith College MA
-8.8% Marquette University WI
-8.7% University of Pennsylvania PA
-8.7% St. Lawrence University NY
-8.6% University of Alaska Foundation AK
-8.5% Berry College GA
-8.1% University of Oklahoma OK
-7.7% Rush University Medical Center IL
-7.7% Abilene Christian University TX
-7.7% University of Colorado Foundation CO
-7.6% North Carolina State University & Foundations NC
-7.4% University of Arizona & Foundation AZ
-7.3% National University CA
-7.0% University of Memphis TN
-7.0% College of William and Mary & Foundation VA
-6.8% University of California Irvine Foundation CA
-6.7% Hofstra University NY
-6.7% Colorado College CO
-6.6% Auburn University & Foundation AL
-6.5% Skidmore College NY
-6.4% University of Nebraska NE
-5.9% Purdue University IN
-5.8% University of California Berkeley Foundation** CA
-5.7% Rutgers, The State University of New Jersey NJ
-5.5% The UCLA Foundation CA
-5.4% University of San Francisco CA
-5.3% University of Richmond VA
-4.9% University of Missouri System MO
-4.8% Virginia Tech Foundation VA
-4.7% Georgetown University DC
-4.5% The University of Utah UT
-4.3% New York University NY
-3.8% University of Denver (Colorado Seminary) CO
-3.6% The Fuller Foundation CA
-3.5% University of Wyoming Foundation WY
-2.6% University of South Carolina SC
-2.4% Wayne State University MI
-2.4% Clark University MA
-2.2% Texas Tech University System TX
-1.8% Washington and Lee University VA
-1.4% Washington State University WA
0.8% Johnson & Wales University RI
3.6% Temple University PA
3.8% Mississippi State University & Foundation MS
4.9% Georgia Institute of Technology GA
8.7% University of California San Francisco Foundation CA
8.8% University of Virginia VA
10.7% The New School NY
13.1% Michigan State University & Foundation MI
14.9% University of Illinois & Foundation IL
17.6% University of Massachusetts Foundation MA
29.0% VMI Foundation VA
61.5% University of Minnesota & Affiliated Foundations MN
101.0% University at Buffalo Foundation NY
<p>I believe that Haverford may well have killed its ability to compete at the top of the LAC universe. They have been trying to scratch and claw their way out of a financial hole from the 1970s and this endowment loss is just devastating. As I understand it, their per student endowment was larger than Swarthmore’s in the 1960s. Now, it is barely a third: $289k versus $827K. There has been little or nothing about financial plans on their website, but their situation is ugly with a capital U. This has to have long-term implications on their per student spending.</p>
<p>Perhaps more dire might be Franklin Olin. This is a brand new college that was relying on its endowment to attract top students with free tuition. Their endowment losses are so severe that I have to wonder if their business model even makes sense now. A start up engineering college doesn’t need a 28% endowment haircut right out of the gates.</p>
<p>Their applications have fallen by nearly 50% from over 1000 to 567. The acceptance rate went from 16% to 30% this year with the change in merit scholarships. Those are massive shifts.</p>