Felix Salmon

The art of liquidity management

By Felix Salmon
August 11, 2009

Ben Davis reports:

According to the Chronicle of Philanthropy statistics, it seems that between 2004 and 2006, MoMA eliminated all of its cash holdings (11 percent of its endowment value before that), dramatically upping its hedge-fund exposure.

This is just yet another example of endowments overestimating their risk appetite and underestimating their liquidity needs. It’s largely, I think, a function of the fact that the people who sit on the boards of these institutions — and especially on the committees overseeing investment decisions — tend to come from the financial world. As such, they overvalue alpha generation, and undervalue safety and common sense.

(Via Artnet)

5 comments so far | RSS Comments RSS

Do most of them come from financial industries? That’s surprising to me.

Posted by Sterling | Report as abusive

This is the best you can come up with? Oh I forgot you live in fantasy land and you have the infinite knowledge to determine the best financial practices of every sector of everything. Reuters please can this joke of a blog.

Posted by Dogma | Report as abusive

felix – do you think it might have more to do with the donor’s expectations for how his/her/its’ contribution is to be invested? i’m sure you’ve seen some of the very long mou’s which accompany gifts.

“…”The corporation is expecting to see a strong [sponsorship] package put forward.”… The lines start to blur when a corporation is also a large donor… “We have to be able to think from the potential funder’s perspective…” http://www.globeinvestor.com/servlet/sto ry/GAM.20090811.PRNAMING11ART1840/GIStor y/

Posted by ac | Report as abusive

do most of them come from financial industries?

>i don’t think its the cambridge police department

Posted by dvictr | Report as abusive

“…“Clearly, they did not want to be identified,” said one volunteer at the Heritage Club, who also declined to be identified because he was not authorized to talk publicly for the club. “I thought maybe I’d just put a generic ‘TARP Recipient’ sign at the center of each table.” Those who plan corporate events call the new practice “stealth spending.” In some cases, a corporate gathering is so well disguised that the event planners may not even know whose event they are working on. The subdued approach — no greeters at airports with corporate signs, no large banners — stems from worries that anything too lavish will suggest the companies are out of touch with the painful financial circumstances of many Americans… The biggest trend “is having an event, but no one knowing whose it is,” said David Beahm, a Manhattan event planner… At a recent fund-raiser at the Museum of Modern Art, corporations were pleased to see a chandelier made out of recycled soda bottles and tablecloths created from recycled potato chip bags… “It’s not that corporations don’t have the money,…They don’t want to show they have the money…” http://www.nytimes.com/2009/08/12/busine ss/12event.html?ref=business

Posted by ac | Report as abusive

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