<p>Oh and Interesteddad, I see that Swat added something like 15 students.</p>
<p>There goes the endowment per student number . :)</p>
<p>I don’t think the students are going to notice the difference.</p>
<p>I appreciate your link. ( I was worried it was going to be 50 pages. :))</p>
<p>It was good.</p>
<p>Swat has a debt load of over $200 million? I’m looking at the school’s interest payments of around $11 million.</p>
<p>Interest, that was my thought as well that Swarthmore has been as accurate as any school in estimating all of their assets while schools that have been more aggressive in private investments are picking numbers out of thin air.</p>
<p>barrons:</p>
<p>With some universities these days, it’s hard to tell whether they are really in the education business or whether they are health care institutions that dabble in education on the side. For example, Emory’s heath care revenues dwarf their education components. It makes evaluating the finances of the education part quite difficult.</p>
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<p>I don’t know why that’s shocking. Moody’s had been saying all along that the average endowment loss on Dec. 31st would be 30%. There were a lot of schools lying about their endowment losses by conveniently neglecting to account for private equity that hadn’t been written down. There were even some investment managers going on every TV show thumping their chests about how brilliant they were while their universities were issueing taxable debt to meet payroll because said investment gurus failed to provide adequate liquidily.</p>
<p>I was shocked because I read your posts, interesteddad. :)</p>
<p>From the Ann Arbor News…</p>
<p>"The University of Michigan lost about $2 billion from its endowment by the end of 2008, a drop of nearly 27 percent in value.</p>
<p>The battering taken by the financial markets was reflected in a report in the agenda materials for the monthly meeting of the U-M Board of Regents, held Thursday at the Dearborn campus.</p>
<p>The report indicates the endowment, valued at $7.6 billion on June 30, dropped to about $5.6 billion by Dec. 31. The report includes the university’s investments in stocks and bonds, plus other types of more complex investments that include hedge funds and private equity agreements valued only on a quarterly basis.</p>
<p>Regents chairwoman Kathy White, D-Ann Arbor, said the university remains financially stable because of a combination of cost-cutting and prudent investments.</p>
<p>She said the regents are meeting with the university’s executive officers each month to discuss finances. In June, regents will vote on the budget for the coming academic year and any tuition increases. White said the budget “will be lean” and include “substantially lower cost increases.”</p>
<p>U-M also announced Thursday that it held onto top bond ratings from two national ratings services. The ratings of “AAA” from Standard & Poor’s and “Aaa” from Moody’s Investors Service were received by only two other public universities.</p>
<p>Those ratings allow U-M to borrow money at lower interest rates, said Timothy Slottow, U-M’s executive vice president and chief financial officer."</p>
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<p>No, because they increased the size of the faculty by at least two new tenure-track slots - religion and history. Actually, I think they added a third new tenure track slot in bio-statistics. The faculty FTE should increase by more than enough to offset 16 more students and keep the same student/faculty ratio.</p>
<p>They haven’t made any signficant cuts for 2009 – just belt-tightening stuff. If the recent market recovery holds, they may be spared the hard cuts. They had a lot of cushion because their endowment spending was so low. They could absorb at 20% to 25% endowment loss because they had room to increase their endowment spending rate by that much and still stay under their 4.75% ceiling.</p>
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<p>Amherst has $500 million in private equity cash calls and just issued $100 million in taxable bonds to cover operating costs like payroll. They now have over $300 million in debt. This new debt with cost them $5 million a year in additional budget cuts that Williams and Swarthmore aren’t making. That’s a big number. Especially considering that Amherst doesn’t have an Arabic program (one post-doc compared to full three-year programs in place at Swarthmore and Williams) and hasn’t built a new science center. They are increasing enrollment by 200 students, which will signficantly dilute the quality of the “product”.</p>
<p>From what I’ve seen, Swarthmore, Williams, and Pomona (I’ve seen less detail on Pomona) are the least impacted LACs from a budget standpoint. None are making hard cuts, yet.</p>
<p>“No, because they increased the size of the faculty by at least two new tenure-track slots - religion and history. Actually, I think they added a third new tenure track slot in bio-statistics. The faculty FTE should increase by more than enough to offset 16 more students and keep the same student/faculty ratio.”</p>
<p>That was a close one. :)</p>
<p>Oops. I see you said “endowment per student” number. Yes, that got clobbered. Probably not on a relative basis though. I expect Swarthmore to move up to #2 behind Pomona among LACs, Amherst and Grinnell have both taken a beating – although Amherst’s number will be artificially inflated by borrowing $100 million to meet payroll because they didn’t have any liquidity in the endowment to cover operating expenses. IMO, that debt is qualitatively different than a 30 year mortgage on a new building.</p>
<p>Interesteddad, </p>
<p>Obviously the schools are putting this out there as good news, are they? I mean how do you find out if a school had to do some creative borrowing to meet short term obligations like payroll? And how much debt is too much debt for a school? Is it a ratio thing like when I might buy a house or something? And kinda joking and kind serious… what do you do for a living cuz the degree that you know things is far more than merely “interested.” :)</p>
<p>All info very much appreciated, as always. xoxo :)</p>
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<p>Agree. The problem, as pointed out in the VF article, is that no one credible wants these jobs. The academics are offended by the pay scale necessary to attract the right professionals.</p>
<p>Interesteddad, I would subtract all the debt from the endowment when looking at endowment per student. So at the very least, if a school had a one billion dollar endowment, and 200 million of debt outstanding, the largest number I would use to calculate endowment per student is $800 million</p>
<p>Ok… I see that Swat had about $184 billion in debt and Williams has around $240 million in debt as of Mar 31 of this year.</p>
<p>[College</a> Considers Big Cuts in 2010-2011 :: The Daily Gazette](<a href=“daily.swarthmore.edu domain has changed”>daily.swarthmore.edu domain has changed)</p>
<p>hmom5, I think the credible guys blew up too. A lot of the investments were made by guys who were well thought of in the industry.</p>
<p>What is going to happen to all that timberland?</p>
<p>I see that Amherst’s debt is about $320 million.</p>
<p>[Amherst</a> plans $100M bond to offset losses - Boston Business Journal:](<a href=“http://boston.bizjournals.com/boston/stories/2009/02/23/daily36.html]Amherst”>http://boston.bizjournals.com/boston/stories/2009/02/23/daily36.html)</p>
<p>"Experts said that there are drawbacks to using debt, instead of endowment funds, to fund operations. “It’s a little like borrowing from your home equity line to make your mortgage payment,” said Persis Rickes, president of higher education consulting firm Rickes Associates Inc.</p>
<p>With the issuing of the new bond, which is expected to close Feb. 26, the college’s total debt will rise to $320 million. That’s caused some anxiety among credit rating agencies Standard & Poor’s and Moody’s Corp. (NYSE: MCO), which recently revised the outlook for the college to “negative.”</p>
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<p>Over a couple of generations, the timber will probably still be worth a lot as lots of East and South Asians build houses. Unless we think that the fundamental assumptions about demographics and development are incorrect, I don’t see why these are problematic other than the currently liquidity problem. The timberland investments were always intended to have long time horizons. Other than liquidity, is there something else you see as being at work here? Do you think there was a bubble in timberland valuations at the time the universities invested (which was typically a while ago, I’d guess, as they were early players)?</p>
<p>Where the universities became really short-sighted and greedy was to expect extremely high returns every year from VC’s and private equity groups as these asset classes tend to be cyclical and in over-believing in the absolute return story for a lot of hedge funds. I have some investments in this area that went down substantially less than the market but have other investments that matched the market.</p>
<p>I suspect that many of the well-endowed universities have lots of fat. Harvard has a lot and the 275 cuts don’t get anywhere near the muscle let alone the bone. They have little fiefdoms and deanhoods for all kinds of things. Getting rid of the fat will actually increase both the numerator and denominator of productivity as with fewer people, decisions can frequently mean faster decisions.</p>
<p>OK, try this:</p>
<p>Today, the S&P 500 is about 25% down from where it was 4 years ago, and about equal to where it was 6 years ago. The 10-year rate of return on the S&P 500 is about -2%. I couldn’t find an 11-year rate, but I think it would be negative, but a little less so.</p>
<p>Today, the Harvard endowment, net of all contributions received and amounts expended for the university, is about equal to where it was 4 years ago, and almost 50% higher than where it was 6 years ago. Based on last year’s June 30 report, and assuming a 25% loss this year, the 11-year rate of return on Harvard’s investment performance is about 11%.</p>
<p>So why do you all want to fire the people responsible for this?</p>
<p>“Other than liquidity, is there something else you see as being at work here? Do you think there was a bubble in timberland valuations?”</p>
<p>Yes. Caused by the buyers of timberland like Harvard. Harvard was buying timberland. Pushing prices up by buying it and thinking they were geniuses as the price moved up.</p>
<p>JHS, yes, I think they should be fired. That’s my initial reaction anyway.</p>
<p>Their cash flow management skills are very poor.</p>
<p>As for your example, how much of the endowment was raised during those years, how much was spent, and what happened to the school’s debt?</p>
<p>Also, how much riskier was Harvard’s strategy compared to the markets? How much leverage was used?</p>
<p>What are the illiquid assets going to do to Harvard’s investment returns?</p>
<p>It’s real easy to get outsize returns when you are buying illiquid assets. Your very actions are increasing the price of those assets.</p>
<p>What happens when you get out? When is the demand for the illiquid assets going to occur?</p>
<p>It could be that I don’t understand economics. It could be that I underestimate the seriousness of Harvard’s issues. But somehow, I just can’t muster sympathy for poor Harvard. Or its students. Not when I consider the school’s vast resources and the glaring lack of resources at, say, my state U.</p>
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<p>I am not seeing much sympathy on this thread. I am seeing a lot of Harvard bashing. I have never figured out why people love to bash Harvard so much.</p>
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<p>Because to achieve those returns, they managed the investments in a way that failed to provide sufficient liquidity to cover payroll and other operating expenses. For a university with that kind of endowment resources, it takes pretty severe financial mismanagement to not be able to pay the light bill.</p>
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<p>I have. It’s the same reason why people bash the NY Yankees, Microsoft, California, and United States of America. When you are perceived* as number one, especially over an extended period, others get resentful, and it paints a big target in the middle of your back. Thus the constant bashing and the attendent glee and gloating when number one stumbles.</p>
<p>*You don’t have to actually be number one, just perceived as such.</p>