What was the value of the Williams endowment at 4:00 PM on June 30, 2009? Good question. That valuation will have all sorts of important consequences for budget planning in the year to come. Initial thoughts:

1) Morty told us at reunion that the endowment was worth $1.4 billion. Given that the S&P 500 was at 946 at that point and then fell 2.4% to finish the (fiscal year) at 923, we might adjust Morty’s estimate of a down 17%-18% result for the year to around 20%. So, if the endowment started the year at $1.8 billion and we lost 20%, then we should now be at $1.44 billion. But the College also spent $90 million from the endowment. (Most current gifts would have gone directly into spending as well.) It matters a bit whether or not you subtract that $90 million from the start of the year or the end of the year value, but, round numbers, the value of the endowment for Jun 30, 2009, when the final report reaches us next fall, will be somewhere around $1.35 billion. You read it here first.

2) At some point, I hope to do a much more formal analysis, like last year’s. Perhaps someone will save me the trouble and do it now.

3) The big unknown is the valuation of the hundreds of millions that the College has invested in private equity and venture capital. If the College had invested $50 million in a private equity fund in June, 2008, what is that money worth now? Hint: It is much less than $50 million? But, in some respects, the “true” valuation is beside the point. What valuation with the managers of the fund report to the College? I don’t know but I am highly suspicious. And the fact that these amounts are “audited” by auditors paid for by the private equity manager gives me about as much comfort as a AAA rating from Moody’s.

4) But, I suspect that Morty might have already have had some early information about these valuations, so I suspect that his $1.4 billion number is “accurate,” or at least consistent with what the College will report in the fall. A smart Record reporter, however, would check to see if this claim is consistent with Morty’s talk in October 2008 and the market movements since then. Another item on the to-do list.

UPDATE: Thanks to eyetoldyouso for noting this July 1 letter from President Bill Wagner.

As you know, the June 30 endowment figure plays an important role in the College’s financial planning. While it will be months before we have a final audited figure, it is likely that our investment return will be better than the -35% that we conservatively used in our planning model. If that proves to be true and if our return for the next two years comes close to the zero that we have been modeling, that would reduce to some degree the extreme pressure that we had projected the College facing a couple of years from now. We still, however, continue to face significant challenges and will need to follow through on the cost-saving measures we have put in place.

Well, -20% would be “better” than -35%, but I don’t see many clues beyond that. I find it vaguely annoying that Wagner would throw around such an absurd estimate when he knows (he was there) that Morty provided the -18% estimate two weeks ago. Thoughts:

1) Perhaps Wagner is just low-balling the numbers — like any good corporate CEO — so that the the College can provide an upside surprise in the fall.

2) Perhaps I misunderstood Morty and the -18% number was just for the College’s liquid securities (those that Chilton would have good estimates for), without factoring in the performance of things like private equity and venture capital. I really don’t think that this is what Morty meant.

3) Perhaps further news as come out in between Morty’s talk at reunion and this letter. It could be that Chilton thought on June 1 — either guessed for herself or was told by her managers — that the losses on illiquid securities were X. Then, around June 30, she figured out that the losses were Y, with Y being much greater than X. So, the College might actually report a loss between 25% and 30% in the fall. This seems unlikely but not impossible.

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