<p>^ Also, Haverford gets only about 30% of its operating budget from endowment payout. Harvard’s Faculty of Arts & Sciences depends on endowment payout for more than 50% of its operating budget. That means a 30% reduction in Harvard’s endowment payout over the next several years (or even 27%, which I believe Harvard is still claiming as its endowment loss) will take a bigger whack out of its Arts & Sciences budget than a 35% reduction in Haverford’s endowment payout. Not to say it’s going to be easy in either case.</p>
<p>I haven’t figured out what happend to Haverford’s endowment. There is a note in the financial report that they had 50% invested with one fund management company in an indexed mix of funds. It could be that they had the opposite problem of Harvard – big investment percentages in an S&P index portfolo. That would have gotten you whacked pretty hard last year. I just don’t know. I was stunned when I saw the losses because I’m seeing those kinds of losses in LAC endowments – or in any endowments.</p>
<p>Each college and unversity has its own set of problems. Sometimes it’s unsustainable endowment spending draw. Sometimes its liquidity issues. Or too much debt. Haverford looks like it will be in serious thrash mode to cover the cash calls over the next four years.</p>
<p>It does look like Haverford is more heavily exposed to common stock which with the recent rebound in the market should help them out. Because Yale and Harvard sold virtually all their US and foreign common stock they will not benefit from the improvement in the market.</p>
<p>HANOVER, N.H. (AP) – The president of Dartmouth College says more layoffs are possible to address a significant drop in the school’s endowment.</p>
<p>President Jim Yong Kim told the Valley News Monday after meeting with faculty that the shortfall from endowment losses is bigger than expected.</p>
<p>Kim announced earlier this month that endowment losses of $835 million had created a $50 million gap in operating revenue.</p>
<p>[The</a> Morning Leverage: Another Day Older And Deeper In Debt - Private Equity Beat - WSJ](<a href=“http://blogs.wsj.com/privateequity/2009/10/28/the-morning-leverage-another-day-older-and-deeper-in-debt/]The”>http://blogs.wsj.com/privateequity/2009/10/28/the-morning-leverage-another-day-older-and-deeper-in-debt/)</p>
<p>The WSJ does a good job of blogging the state of Private Equity. Today’s blog illustrates the dire straight of some of the biggest deals in private equity and real estate</p>
<p>[The</a> Harvard Crimson :: Opinion :: No Return on Investment](<a href=“http://www.thecrimson.com/article.aspx?ref=529795]The”>http://www.thecrimson.com/article.aspx?ref=529795)</p>
<p>[The</a> Harvard Crimson :: Opinion :: Dissent: Bursting Harvard?s Bubble](<a href=“http://www.thecrimson.com/article.aspx?ref=529796]The”>http://www.thecrimson.com/article.aspx?ref=529796)</p>
<p>Two very good editorials from the Harvard Crimson-fallacy is the idea that greater risk equals greater long term return. Greater risk(hubris) equals greater fall and Harvard took more risk than anyone.</p>
<p>[UPDATE:Yale</a> University To Sell $1B 5-Year Bond,Demand Over $5B - WSJ.com](<a href=“http://online.wsj.com/article/BT-CO-20091103-713677.html]UPDATE:Yale”>http://online.wsj.com/article/BT-CO-20091103-713677.html)</p>
<p>Yale going another $1B in debt. Article misses $2b in new debt last fiscal year. Now in a dead heat with Harvard at a total of $6Billion in debt, almost 40% of the value of their endowment.</p>
<p>Yale will use $560M of the new debt to pay off existing debt so their overall debt will be less than $5.5B. They also took out a $1B line of credit to increase liquidity. Moody’s also stated that they have $7.6B in capital committments outstanding. And they had 80% of their endowment in absolute return, real assets, and private equity(which are all typically tier 3 assets) which is higher than Harvard’s in those areas.</p>
<p>[2</a> gifts to Amherst College total $125m - The Boston Globe](<a href=“http://www.boston.com/news/local/massachusetts/articles/2009/11/04/2_gifts_to_amherst_college_total_125m/]2”>http://www.boston.com/news/local/massachusetts/articles/2009/11/04/2_gifts_to_amherst_college_total_125m/)</p>
<p>Very good news for Amherst</p>
<p>One last comment from Moody’s on Yale. It’s interesting that most of their debt is more short-term including $1.34Billion of variable rate demand obligations which pretty much means the lender can call the debt any time it wants. They also spent $650M in captal in FY2009 and are trying to wind down the spending in that area. To meet the short-term liquidity needs they have $800M in cash and $800M in marketable securities but after that they believe they have about $2.5B in assets that they could liquidate within a month.
Moody’s summarizes it pretty accurately"the University’s approach to liquidity management remains somewhat more aggressive than their peers".</p>
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<p>Dartmouth has announced some hefty unspecified budget cuts coming. They are also reducing their endowment burn rate to from the current 6.3% (not 8.1%) down to between 5.0 and 5.5%:</p>
<p>[TheDartmouth.com</a> | Dartmouth aims to cut $100 million from budget over next two fiscal years](<a href=“http://thedartmouth.com/2009/11/06/news/budgetwu]TheDartmouth.com”>http://thedartmouth.com/2009/11/06/news/budgetwu)</p>
<p>This the quote that caught my attention, and suggests things are not good at Dartmouth:
</p>
<p>^^No, things are not good at Dartmouth. Any time you have to cut your budget by $100 million over two years, that can’t be good.</p>
<p>Dartmouth’s problem is more of an operating one-their operating expenses exceeded revenues by $65M in 2008. Needless to say Dartmouth’s $100M cut is going to be alot more painful on a $700M overall budget than $100M cuts at places like Yale and Stanford with multi-billion dollar budgets.</p>
<p>[Capital</a> Call Squeeze? PE Deal Activity Accelerates - Private Equity Beat - WSJ](<a href=“http://blogs.wsj.com/privateequity/2009/11/09/capital-call-squeeze-pe-deal-activity-accelerates/]Capital”>http://blogs.wsj.com/privateequity/2009/11/09/capital-call-squeeze-pe-deal-activity-accelerates/)</p>
<p>This is probably causing some heartache at Y and H with their $7B plus capital committments and very limited liquid assets. Add this to the insider trading scandal at the Hedge Funds and the collapse of real estate and you have a pretty interesting year ahead for the endowment community.</p>
<p>Getting back to Dartmouth it’s interesting that in the press release they say they had already implemented a $72M reduction in costs for 2009 and 2010 yet actual expenses for 2009 were $735M versus $725M in 2008. Which demonstrates that its alot harder to do cuts than to talk about them. Also, the endowment spending rate was 8.1% in 2009-they increased their endowment spending to $227M in 2009 from $161M in 2008 and the value of the endowment decreased to around $2.8B.</p>
<p>^ I thnk need blind and meeting full demonstrated need is a moving target and this year it moved far more than in years past.</p>
<p>Wesleyan’s info released: <a href=“http://www.wesleyan.edu/finance/financeDept/reporting/Annual%20Financial%20Reports/2008-2009.pdf[/url]”>http://www.wesleyan.edu/finance/financeDept/reporting/Annual%20Financial%20Reports/2008-2009.pdf</a></p>
<p>comments?</p>
<p>I think the things people (e.g., interesteddad) will be looking at are 1) the year’s draw from the endowment, which at 5.5% seems unexpectedly low given the net loss in year to year endowment (27%), 2) the overhang from so-called Level Three investments which seems a tad high, but, again, only in relation to this year’s endowment value (as opposed to when the commitments were first made) and, 3) Wesleyan’s overall debt which is unsurprising.</p>
<p>As a postscript, we know from articles published in this week’s <em>Argus</em> that the endowment is up nearly 9% from when the data was originally collected for this report and that the amount that the budget needs to be shrunk has been whittled down from $20 million to about $5 million, suggesting major progress toward reaching that goal.</p>
<p>Overall, the report reveals that Wesleyan is remarkably well-managed. If you have any doubts, just compare Wesleyan’s financial condition to Vassar’s, a mid-sized LAC to which it is often compared: Wesleyan’s endowment draw is 5.5% compared to ~7.5% for Vassar.</p>
<p>Moreover, Wesleyan still spends per capita – as much as rival Williams on their core academic enterprise (instruction + research.)</p>
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<p>Modadunn, why do you say that?</p>
<p>I don’t mean this in a confrontational way, but if you have any cites, I’d be interested in seeing them. I’m finding that it’s very hard to get info on this topic now.</p>