Yale Loses Six Billion, Congratulates Self
posted by Dave Hoffman
From an email I got from Richard Levin, in which he tells us that nothing (much) is going to change in New Haven:
It is not our custom to announce the mid-year status of our endowment portfolio, but these unusual circumstances call for a departure from custom. Thanks to the outstanding work of David Swensen and his colleagues in the Investments Office, our endowment has declined significantly less than market indices. Taking into account only the value of marketable securities, our investment return from July 1 through October 31 was a negative 13.4%. But this does not tell the whole story. Our endowment is invested in both marketable securities (chiefly stocks and bonds) and “illiquid” assets, such as real estate and private equity investments that are not traded on a daily basis and are difficult to value with precision. The value of our marketable securities has declined further since October 31, and, even earlier, we began to establish reserves in anticipation of substantial decreases (“write-downs”) in the value of our private equity and real estate investments. As a consequence, our best estimate of the endowment’s value today is $17 billion, a decline of 25% since June 30, 2008, and this is the value we are using for purposes of budget planning. We are also assuming that the endowment will remain flat during the 2009-10 academic year and resume growth after June 30, 2010, at the rate that we have historically used in our budget modeling.It is important to recognize that $17 billion is still a very large endowment. This was where the endowment stood as recently as January 2006. Still, the 25% decline we have experienced has a very significant impact on our operations because income from the endowment supports 44% of the University’s annual expense base of $2.7 billion. Fortunately, our endowment spending policy spreads the effect of market changes over several years, allowing us to respond gradually.
Must be nice.
[Update: Thinking about it more, if it is true that Swensen only lost 25% of his holdings this year, it's yet another reason to think of him as Yale's most important employee, and probably the larger educational world's MVP.]
December 16, 2008 at 5:28 pm
Posted in: Uncategorized
Print This Post
Leave a Reply