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Lafalum

Where's the outrage???

The Boston Globe is reporting a hiring freeze and Budget cuts at Harvard because of the endowment losses. Harvard is trying to sell or get out of their "alternative" investment gambles, the very same investments our BOT and our 600,000 dollars a year investment manager put 50 % of our portflio  in. ( That includes a hedge fund managed by former Harvard managers that went to "0" in two years, we had 10 mio in that fund).
Its time for this guy (Larry Ramer's good friend) to be fired and if there were any honor, some resignations from the BOT. 200 MILLION DOLLARS LOST, that is almost the entire value of the last campaign and 1/2 the value if the next campaign. Money lost in these hedge funds is permanent money lost since they are levered. Where's the responsibilty?????
Similar actions are planned at Duke, Columbia, Dartmouth, Yale, Brown and Cornell.
Pard4Life

I think Weiss may have issued a more stern statement in the alumni magazine letter.. but can't recall anything about a hiring freeze per se.. I think there was mention of cost reductions.  For one, they can start by getting students to turn off their lights and computers when they leave their rooms...

Just to be a bit objective here lafalum, but where are you seeing the massive losses and investments in hedge funds?  I am aware of only a few bp losses against the usual benchmark indecies.. and an 'alternative' asset allocation somewhere around 10%.  And, I thought asset values declined not as much... the number I am aware of was posted somewhere on here earlier (not that bad)... unless thre is some clever accounting going on of course.

As for the investment advisor, I completely agree... a prinicipal of the firm sits on our BOT. Not sure if he advises us directly, but the relationship in and of itself raises some ethical questions.  Frankly, it should be an independent advisor with no relationship to the BOT... more objective and conflict-free advice.  I think of it being the same as an advisor selling his/her own products to their client.
Lafalum

The 50 % figure comes from the audit report which can be found on the internet. The audit was dated Oct 2 of this year and states that 50% of the portfolio is in hedge funds. The audit covers the last two years and covers our books to the end of June. This was confirmed to me by two members of the BOT and the highest source at the College. (no need to name names) The loss at the end of Sept was 150,000,000 dollars and at the Lehigh game a member of the BOT told me it was now over 200 mio.
This does not count evaluations of some of the more illiquid instruments and investments ( real estate, forestry, I believe we have a 10 mio stake in the old  Easton Hotel which is now a condo project,etc.). The portfolio is run out of a college owned subsidary called Hollow Brook Assc. For that reason the compensation for the investment advisor, (Wayne Nordberg '60) is not disclosed but on good authority it exceeds 500,000 dollars per year. Wayne is not a member of the BOT but was at one time I believe. There is an investment committee now chaired by Peter Simon who has assumed it within the last year I think. The clearing agent for the portfolio is Bank of New York ( the former employer of the chairman of the BOT). I  believe the fees for that was competively bid and a blind transaction by Griffith.
The payout from the Portfolio is a rolling average so from Weiss' stanpoint there is no panic yet as it is only in future years that the college will be effected in the operating budgets....but it will.... 200 mio time 5 pct is 10 mio dollar reduction eventually, if the portfolio value stays depressed. It is based on the value at end of the fiscal year. Last year's reduction was 5- 6 pct so the effect this year has been minor ( 1.5 mio on an approx 135 mio dollar budget)
bison137

Lafalum wrote:
The 50 % figure comes from the audit report which can be found on the internet. The audit was dated Oct 2 of this year and states that 50% of the portfolio is in hedge funds. The audit covers the last two years and covers our books to the end of June. This was confirmed to me by two members of the BOT and the highest source at the College. (no need to name names) The loss at the end of Sept was 150,000,000 dollars and at the Lehigh game a member of the BOT told me it was now over 200 mio.
This does not count evaluations of some of the more illiquid instruments and investments ( real estate, forestry, I believe we have a 10 mio stake in the old  Easton Hotel which is now a condo project,etc.). The portfolio is run out of a college owned subsidary called Hollow Brook Assc. For that reason the compensation for the investment advisor, (Wayne Nordberg '60) is not disclosed but on good authority it exceeds 500,000 dollars per year. Wayne is not a member of the BOT but was at one time I believe. There is an investment committee now chaired by Peter Simon who has assumed it within the last year I think. The clearing agent for the portfolio is Bank of New York ( the former employer of the chairman of the BOT). I  believe the fees for that was competively bid and a blind transaction by Griffith.
The payout from the Portfolio is a rolling average so from Weiss' stanpoint there is no panic yet as it is only in future years that the college will be effected in the operating budgets....but it will.... 200 mio time 5 pct is 10 mio dollar reduction eventually, if the portfolio value stays depressed. It is based on the value at end of the fiscal year. Last year's reduction was 5- 6 pct so the effect this year has been minor ( 1.5 mio on an approx 135 mio dollar budget)



I've been following the endowment situations at a number of schools and am curious about the LC situation.   Two questions:

1.   Is the 200MM loss to which you refer just for this fiscal year, i.e. from July 1st to date?

2.   Do you happen to know the link for the audit report?


Bucknell has taken a loss, as has everyone, but thankfully not as big a pct as the LC numbers above.
Lafalum

The 200 mio is from the beginning of the fiscal year July 1, 2008. Last years loss was about 5-6 % of the portfolio.
The audit report comes from www.dacbond.com but the way to access it is to google "Lafayette College form 990 for 2007"  and under the title Lafayette College ( 7 th entry on the first page) the address will take you to a pdf file  from dacbond ( an information service for investors in munis) which has a copy of the audit report from Grant Thorton from Oct 2, 2008.
You will see in the body of the report  the amount of funds in hedge funds and other alternative investments.
Lafalum

Pard4Life wrote:
 I am aware of only a few bp losses against the usual benchmark indecies.. and an 'alternative' asset allocation somewhere around 10%.  .


Whoever told you that is not informed, the exact information on "alternative investments" is in the Grant THorton audit which you can get through the google search described in the previous post.

Here are figures directly from the reports (rounded)
As of June 30,2008
Alternative Investments 344 mio
Total Investments          646 mio

That is 53 pct of the total portfolio
If you breakdown the alternative investments they are:
Long/Short  103 mio
multi strat   100 mio
distressed     38
opportunistic
fixed income  27
real estate     23
private equity53
There is a potential call for an ADDITIONAL 100 mio in private equity.
In addition there is 224 mio invested in equity via mutual funds ( we know what happened there in last six monts)
Evaluation of the alternative funds ARE DONE BY THE FUND MANAGER according to the report.
Doesn't look like 10 pct to me at risk.  
If you just take the easiest to value, equity mutual funds that is 78 million dollar losss alone assuming a 35 pct market loss. Hedge funds perhaps higher since they are leveraged. In addition the college has 150 mio in debt so this is leverage on leverage. The 200 mio number looks very realistic to me and maybe its more!!
There are two jobs which a BOT has sole responsibility, picking a president and managing the endowment. They excell at reproducing themselves and rolling over for past presidents. Time for a change in this group?? I think so. Time to fire our investment manager...at the very least!!
TheRock90

Front page article in todays Express-Times - titled, "Colleges hit hard in tough times". Without getting into all the details, it mentions that all Lehigh Valley colleges reported losses, but few released figures.

It does report that LU's holding dropped from $1.09 bllion to $888 million according to the schools newspaper and that Moravain dropped 17% from $89 million to $74 million, according to the college.  The story ends with the following, "Lafayette College did not respond to repeated requests for comment."
TheTruth

The big problem is you can expect the endowments to drop a bit more since those numbers are probably for October.  I think it is fair to say that most colleges will drop at least 20%.  What I find interesting is initially people predicted that "tuition dependent" schools would suffer the most in these economic times.  Now it appears that the "endowment" dependent schools are the ones making all the budget cuts and hiring freezes.

Like lafalum mentioned most uses a rolling 3 year average to determine how much they will draw from the endowment.  Some may word it as an average of 12 previous quarters, same principle.  This protects you from large declines such as this.  On the flip side, if things stay shaky for a while, it also means that future projects may be in jeopardy as it will take some time for the endowment to return to 2007 levels and the anticipated endowment draw.

What the latest on the reduced teaching load and hiring additional faculty?
Lafalum

TheTruth wrote:

What the latest on the reduced teaching load, 2-2?

You know the faculty I talk to are very realistic about it. I had lunch with a faculty friend three weeks ago and he fully expects alot of cut backs,delays and cancellations of plans including 2-2. His assessment was the "faculty was more realistic the Weis and the BOT." They see what is going on in higher education in general.
Lafalum

TheRock90 wrote:
 The story ends with the following, "Lafayette College did not respond to repeated requests for comment."


Lehigh in a faculty meeting reported losses at the end of Sept at 200 mio dollars. Sad we can't even be honest with our own faculty and alumni.
TheTruth

man you are fast, lafalum....

They realize what is going on at other colleges.  I've read articles talking about the colleges in the Boston area and Cincinnati area.  Both are the same, budget cuts, hiring freezes, and in some cases, layoffs.

There is nothing to be ashamed of here.  Yes we should have had less in the hedge funds but honestly, there was a lot of pressure to produce higher returns on the endowment.  Then again, why am I not surprised by the secrecy of our administration?  different president, same veil of secrecy.
Lafalum

TheTruth wrote:
.  Yes we should have had less in the hedge funds but honestly, there was a lot of pressure to produce higher returns on the endowment.  Then again, why am I not surprised by the secrecy of our administration?  different president, same veil of secrecy.


Same BOT that's the problem. The same BOT that backed Rothkopf on scholarships and then flipped when donations dried up, same BOt that hired a guy THAT WANTED AND ENGINEERED over 50% of the portfolio in hedge funds (alternative investments). This is a group that worries more about the next cocktail party or Board trip to Italy than doing the right thing. THEY ARE CIRCLING the wagons now and like the scholarship issue its when they can do the most damage because they won't listen to independent voices of reason. They are more interested in covering their own butt than opening up to an independent assessment of the situation.
That's the reason they are so secretive!! It's the only reason. TIME FOR THEM TO GO. (or a least the leadership and the investment manager with them and his 1/2 mio in fees per anum.)

By the way, at time we could use some experience in the PR area, I  hear Weis has harrassed our long time PR head out the door to hire one of his minions from JH.
TheTruth

By the way at time we could use some experience in the PR area I  hear Weis has harrassed our long time PR head out the door to hire one of his minions from JH.

Yes, you are correct about him being forced out.  Again, the veil of secrecy.  Is there some type of secret handshake for the BOT?  This group is starting to remind me more of the Water Buffaloes (Flintstones) rather than a leadership group that runs the college.
ranger

Dear Santa,
Please bring us a new President for Lafayette College and a  new Board of Trustees that understands leadership. Leadership is not wanting to be like Middlebury, Williams or Johns Hopkins. Leadership is recognizing the strenghts of Lafayette and building on the positives.
Pard4Life

I am not sure how Weiss is such a bad President... the BOT yes.

We still have branding, PR, and 'motivational' issues though.  I caught a glimpse of Amherst's campaign slogan in a Nov.29 NY TImes artcile... "building future leaders" or something like that.. simple and brillant... I don't know what our theme is... give us more money for faculty?  That's what I see..
Pard4Life

Wow you are most definetely correct... page 17.. I think anyone here who knows something on investments should look...

http://www.dacbond.com/GetContent?dctm_r_object_id=0900bbc7800d56d1
TheTruth

Thanks for posting the audit report.

Weiss is fine as president.  he brings some very nice qualities that are definitely needed at our school as we strengthen the liberal arts.  Also he has calmed the faculty which is no easy task.  My biggest gripe is the decision to reduce the class sizes in light of increasing faculty.  There was a reason the BOT decided to steadily increase the class sizes, it was to address the growing need to fund our athletic program and support the strengthening our academic programming.  They knew that we need to strengthen the performing arts.  you need more faculty and an expansion of the Arts Center.  It costs money and not all of it can be raised from the alumni.  The additional tuition from larger class sizes would support the growth of the faculty and programs.  That is just one example.  

Please understand that I agree with growing the faculty and our academic programs.  I also applaud last year's decision regarding financial aid.  But I have to ask, where is the money coming from?  Most likely the endowment until it is funded by donations from a Campaign.    I know you can't predict financial crisis but you should know that at some point the endowment would not continue to see 15-20% returns.  You have to know based on past economics that there are peaks and valleys, ebbs and flows.  The additional tuition from the student base would protect us in those situations.  We don't have that cushion anymore.  Now I understand applications are down 20%, which is expected in this climate (nobody to blame there).

I really would like to see more honesty and openness from our administration that is something that starts at the top.  There is nothing to be ashamed of with this crisis.  Everyone's endowment is taking a hit.  I'd like to know how the college is dealing with it.  If budget cuts are needed I hope they are protecting the academic and student services budgets so it doesn't affect the student experience.  make the other administrative departments tighten their belts.  is there maintenance that can be delayed a year?  Do we need to look our heating and electric cost and take measures to reduce those?  Every bit counts so we don't have to layoff any faculty or cancel any classes for spring semester.   Heck, I heard LaSalle laid off 150 adjunct professors for the spring semester.  You don't think that is going to hurt the students and class offerings.

I'd also like to see a more visible BOT.  Not just during Homecoming but create a way to reach out to alumni and communicate what issues they are addressing.  Using technology, you can set up a website to reach alumni all around the country and world.  Maybe there is something but I haven't seen it.  Little things like this will go a long way.
Lafalum

There is a fiscal sweet spot for us and it isn't 2300 students. We want to have a first rate engineering program and that cost money.  Technolgy cost the same if your 2300 or 23000. If the students want a major band to come for a concert it costs the same as if yu were a much larger institution.
The faculty want a broad offering of classes in the liberal arts, including music and the performing arts which is particularly expensive as there is a lot of one on one instruction. We are simply too small to provide everything we want to be without that large endowment which isn't going to happen. So what do we do? We look for  that sweet spot that provides us with enough tuition revenue to buy us  the services and the profile that our present students and future demographic think is important and our alumni donors can support.
Forget about being Ivy light or like Swathmore,or Williams, we should define who we are and be proud of it. The BOT should demand it and our presidents and administrators should buy into it when they take the job. If they don't support that,they should not apply or find another a job.

As to the endowment management, because everyone lost money doesn't make it OK. Putting 53 % of our endowment assets in "alternative" illiquid investments and another 20% in equity mutual funds created a combination  that made it posible to lose 40 pct or more. I know there were several people on the BOT who objected to this large exposure to hedge funds. The number we are now looking at is at the higher end of percentage losses. There are people who should pay the price or resign. It starts with the investment manager who is getting paid to prevent this volatility..who over the last ten years has been paid at least 5 mio dollars. Fire him now and the BOT members who let him put on 53 % in hedge funds should resign NOW. I would also like disclosed if that person's securities firm got any commisions or soft dollars when we bought these hedge funds?? Not only is that unethical but may violate his fudiciary duties as our manager as well as the fudiciary responsibliites of our BOT>

By the way I have heard of more Hedge Funds that have gone to lock down (refused redemption requests). I have also heard with  our problems with Wachovia common fund, hedgefund exposure, and normal cash needs we may be cash flow negative. That in fact has happened to Harvard and they are thinking of issuing bonds.
ranger

yes, I too have heard college is cash flow negative. Senior administator told his department college has more $$ going out than coming in.

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