http://blogs.reuters.com/felix-salmon/2010/05/28/the-problems-with-university-endowments/ A slice of lime in the soda Wed, 19 Jun 2013 23:33:55 +0000 hourly 1 http://wordpress.org/?v=3.4.2 http://blogs.reuters.com/felix-salmon/2010/05/28/the-problems-with-university-endowments/comment-page-1/#comment-15319 ORD Mon, 31 May 2010 23:34:34 +0000 http://blogs.reuters.com/felix-salmon/?p=4050#comment-15319 I attended a public university with an endowment of $35m and annual state funding of ~$50m (FY09). Although not a great light of Western civilization, it specializes in producing competent teachers and useful graduates in physical sciences. It has a total enrollment of almost 12,000, coincidentally about the same as Harvard, so it is possible to educate the same number of students for what Harvard paid just to manage its endowment (this ignores facility costs and tuition, but Harvard has much to be ashamed of on both accounts). I agree that no sane argument can be made that this is a charitable educational endeavor. I attended a public university with an endowment of $35m and annual state funding of ~$50m (FY09). Although not a great light of Western civilization, it specializes in producing competent teachers and useful graduates in physical sciences. It has a total enrollment of almost 12,000, coincidentally about the same as Harvard, so it is possible to educate the same number of students for what Harvard paid just to manage its endowment (this ignores facility costs and tuition, but Harvard has much to be ashamed of on both accounts). I agree that no sane argument can be made that this is a charitable educational endeavor.

]]> http://blogs.reuters.com/felix-salmon/2010/05/28/the-problems-with-university-endowments/comment-page-1/#comment-15281 maynardGkeynes Sat, 29 May 2010 22:04:35 +0000 http://blogs.reuters.com/felix-salmon/?p=4050#comment-15281 Liquidity management is too abstract, cashflow is the problem. But of course, cashflow from real investments -- as opposed to cashflow from borrowing against their over-valued highly illiquid investments, undercuts the whole basis for their strategy -- their strategy for getting absurd compensation, that is. If cashflow is from T-Bills, they have to mark their "gains" to market. If it's from timber land in Idaho that won't be harvested for 20 years, or rather, from bonds issued against a portfolio loaded with things like timber land in Idaho, they can mark to fantasy, and generate sufficient cash from borrowing to keep the college deans happy, and look like geniuses to boot. Which is what they did, until they couldn't. Liquidity management is too abstract, cashflow is the problem. But of course, cashflow from real investments — as opposed to cashflow from borrowing against their over-valued highly illiquid investments, undercuts the whole basis for their strategy — their strategy for getting absurd compensation, that is. If cashflow is from T-Bills, they have to mark their “gains” to market. If it’s from timber land in Idaho that won’t be harvested for 20 years, or rather, from bonds issued against a portfolio loaded with things like timber land in Idaho, they can mark to fantasy, and generate sufficient cash from borrowing to keep the college deans happy, and look like geniuses to boot. Which is what they did, until they couldn’t.

]]>