Harvard--Had No Idea Things Were This Bad

<p>[MIT’s</a> money man Rotner moving to Children’s Hospital - Mass High Tech Business News](<a href=“http://www.masshightech.com/stories/2010/04/05/daily51-MITs-money-man-Rotner-moving-to-Childrens-Hospital.html]MIT’s”>http://www.masshightech.com/stories/2010/04/05/daily51-MITs-money-man-Rotner-moving-to-Childrens-Hospital.html)</p>

<p>Another one bites the dust</p>

<p>[Debt</a> Loads Tell Truth About Private-Equity Charade: David Pauly - Bloomberg.com](<a href=“Bloomberg - Are you a robot?”>Bloomberg - Are you a robot?)</p>

<p>Interesting commentary a sorry state of PE.</p>

<p>[Univ</a>. Will Incur Debt to Finance New WCMC Building | The Cornell Daily Sun](<a href=“http://www.cornellsun.com/section/news/content/2010/04/12/univ-will-incur-debt-finance-new-wcmc-building]Univ”>http://www.cornellsun.com/section/news/content/2010/04/12/univ-will-incur-debt-finance-new-wcmc-building)</p>

<p>Interesting quandry that I am sure other colleges are facing. Cornell wants to build a $650M building and has $360M donated toward it plus one big fat check for $135M. Do you go ahead and build it and add $300M more in debt that you really can’t afford or do you very possibly lose those $360M in donations by not doing the project.</p>

<p>sm74, great links…like always.</p>

<p>Good article. Those interesteded in undergrad at Cornell should note carefully where they fall in the pecking order of strategic priorities at Cornell University. Perhaps they can take at least some solace from “education” at least being listed alongside contract research and operating health care business units:</p>

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<p>[Rensselaer</a> Sells $561 Million to Refinance, Unwind Five Swaps - BusinessWeek](<a href=“Bloomberg - Are you a robot?”>Bloomberg - Are you a robot?)</p>

<p>Some schools sure are taking on some crazy amounts of debt</p>

<p>[Morgan</a> Stanley Said to Lose 61% on Real Estate Fund (Update1) - BusinessWeek](<a href=“Bloomberg - Are you a robot?”>Bloomberg - Are you a robot?)</p>

<p>Pretty much confirms how pretty much worthless PE Real Estate investments have become. Yale is knee deep in real estate PE with an allocation significantly higher than I have seen elsewhere at 37%.</p>

<p>That’s a pretty hefty debt offering for a school with a $615 million endowment. It looks like all the variable rate debt (and interest swap) chickens are starting to come home to roost. This is probably a bit of a time bomb as rates on this debt have been unsustainably low. Schools are going to see these rates steadily rise, which puts significant upwards pressure on operating budgets.</p>

<p>The crazy schools are the ones like Yale and Larry Summers’ Harvard, that bought interest rate swaps, not to cover existing variable rate debt, but to cover bond debt they might incur in the future. That’s just pure speculative gambling on interest rates, using leveraged margin to cover the bets.</p>

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<p>Looks like Morgan Stanley was the proverbial “bigger fool” in that particular ponzi scheme. One wonders if these investment bankers were playing the grown-up version of musical chairs. Round and round they go, when the music stops, nobody knows…</p>

<p>The article above refrences Morgan Stanley’s International real estate efforts. Domestically their biggest investment in addition to buying from Blackstone who had bought from Sam Zell, was their 50-50 partnership with Duke Energy called Crescent Real Estate. Duke was making so much money from real estate it threatened some of their Utility contracts so they sold off half to Morgan Stanley–at just the wrong time for Morgan Stanley. Complete disaster financially.</p>

<p>[The</a> Real Reason UVA’s Endowment CEO Left UVIMCO](<a href=“http://www.businessinsider.com/chris-chip-brightman-uvmico-carolyn-paige-sawyer-2010-4]The”>The Real Reason UVA's Endowment CEO Left UVIMCO)</p>

<p>I guess we now know what the personal reasons were for his departure. You can’t make this stuff up.</p>

<p>Once a frat boy cad, always a frat boy cad, I guess.</p>

<p>So, he not only lost billions for UVa’s endowment, but he put them in potential legal jeopardy sleeping with his assistant. </p>

<p>Good grief. Who hires these people? Where did they prep?</p>

<p>Interest, I’m thinking if I’m on the Board of one of these schools and I’m watching my real estate investments vanish, i’m seeing my investment manager sleeping with his assistant, i’ve got protests on campus right and left over employee layoffs, i’m having to borrow money every quarter to pay the bills-meanwhile I’m watching the basic stock market go up about every day and about double in a year my first question at the next meeting is now remind me again why we are spending all this money with these “experts” managing our money.</p>

<p>And here’s the crazy thing. I saw an article this week that Goldman Sachs has head-hunters trying to lure a big-name university investment officer to head up their new portfolio management operation – managing endowments for pensions and universities with endowments in the $250 million to $750 million range. The idea seems to be to give smaller endowments the “opportunity” to “reap” big returns like the big boys. Maybe they could get Larry Summers! I hear he’s pretty good at timing the credit markets…</p>

<p>I think I’m going to start a competing service that helps endowments bury cash in the back yard of the President’s house. It might be safer than Goldman Sachs and whatever “star” they manage to hire!</p>

<p>sm74, </p>

<p>The only problem with your accountability secario is that the vast majority of the board members are busiy running their own Wall Street ponzi schemes.</p>

<p>[Yale</a> Daily News - State to review prizes cap](<a href=“http://www.yaledailynews.com/news/university-news/2010/04/14/state-review-prizes-cap/]Yale”>http://www.yaledailynews.com/news/university-news/2010/04/14/state-review-prizes-cap/)</p>

<p>One more headache to deal with-dwindling endowment versus preservation of donor intent in spending what is left of the endowment.</p>

<p>[FT.com</a> / FTfm - FT fund management - Goldman fund down to last $30m](<a href=“http://www.ft.com/cms/s/0/84639172-48ef-11df-8af4-00144feab49a.html]FT.com”>http://www.ft.com/cms/s/0/84639172-48ef-11df-8af4-00144feab49a.html)</p>

<p>Any notion that PE real estate has any value was put to bed by this report on Goldman Sachs real estate fund. Down 98%.</p>

<p>dstark (and others), here is a search tool that lists every Recovery Act grant given out through the NIH: [Query</a> Form - NIH RePORTER ? NIH Research Portfolio Online Reporting Tools Expenditures and Results](<a href=“RePORT ⟩ RePORTER”>RePORT ⟩ RePORTER). All Recovery Act grants are public information. I’m sure there are similar tools for Recovery Act grants other than medical.</p>

<p>Ok. Thanks.</p>

<p>[News:</a> Bottom Line Protest Strategy - Inside Higher Ed](<a href=“http://www.insidehighered.com/news/2010/04/26/sweatshop]News:”>http://www.insidehighered.com/news/2010/04/26/sweatshop)</p>

<p>Looks like the students should be protesting the miserable return their endowment is getting on this investment not their labor practices.</p>

<p>Things are pretty quiet at the endowments now but I suspect once kids make their school picks things will pick up again.</p>