Endowments – PEA, PA, SPS, Deerfield, Groton

[Periwinkle]

<p>Wait, wait. P43531, you stated,

At any level of endowment, I was seeking palpable signs of endowment utilization, such as new construction, extensive revival of existing buildings, scholarship-, curricular-, and extracurricular initiatives.

</p>

<p>Schools run capital campaigns to meet such identified needs. One’s endowment should not be used to build new buildings–increasing the costs to run an institution, while decreasing the available income is not a good formula. Think of Harvard’s recent troubles. </p>

<p>There are endowments, and then there are the resources of the schools’ good friends. Building new facilities at this time sends a signal of financial strength among a school’s backers.</p>

<p>I’m a frugal person by nature, so Exeter’s public retreat on the FA front made sense. I’d guess that the school could have either 1) held to the pre-crash program, or 2) adjusted its program in the wake of the crash. Option no. 1 would have (at a guess) entailed spending the funds earmarked for the new program, until the program ran out of money. Option no. 2 involved great difficulties, but would allow the endowed funds time to grow–preserving them as a perpetual fund. </p>

<p>If Phillips Andover has an endowment of $700 million, 3.5% return on it would give it an income of $24.5 million. The significant FA commitment takes a large portion of that income. Incidentally, PEA and PA seem to give out comparable levels of financial aid, both in the number of students and in each school’s overall yearly commitment. </p>

<p>Valuations are a different question. How much is an investment worth, if you have to wait a year to retrieve it? Again, Harvard presents an extreme case.</p>

<p>

In the fall of 2008, Harvard tried to sell off a $1.5 billion chunk of its private-equity portfolio—except no one was willing to pay anywhere near the asking price for those assets. One money manager described a conversation late last year with Jane Mendillo (who in July 2008 became president and C.E.O. of Harvard Management Company) in which he offered to buy back Harvard’s sizable stake in his private fund.</p>

<p>“Here, I think it’s worth—you know, today the [book] value is a dollar, so I’ll pay you 50 cents,” he said. </p>

<p>“Then why would I sell it?” Mendillo responded.</p>

<p>“Well, why are you?” he said. “I don’t know. You’re the one who wants to sell, not me. If you guys want to sell, I’m happy to rip your lungs out… If you are desperate, I’m a buyer.

[Rich</a> Harvard, Poor Harvard | VF Daily | Vanity Fair](<a href=“http://www.vanityfair.com/online/daily/2009/06/harvard.html]Rich”>http://www.vanityfair.com/online/daily/2009/06/harvard.html)</p>