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Haverford endowment disaster

hwc writes:

The first of many interesting June 30th, 2009 annual reports just popped up and – wow! – is it ugly.

Haverford posted a staggering 35.6% drop in endowment value from one year earlier. No wonder there hadn’t been any “updates on the economy” from the President.

With a total endowment of $336 million. $140 million is in Level 3 assets — the new accounting lingo for assets such as private equity partnerships for which there is no established market price.

With a total endowment of $336 million, they have about $192 million that is liquid within 12 months. They have $104 million of debt. And they have $140 million of outstanding cash calls that they expect to be called within the next four years.

I don’t know what their budget calls for, but last year’s endowment spending would be 7.3% of the new endowment number.

Essentially, they are going to have to cash out the entire liquid portion of their endowment to cover operating expenses and private equity cash calls over the next four years.

Breathtaking. I think there are going to be many more of these reports to come.

Also:

Link:

Haverford 2008-2009 Annual Report (PDF)

Page 13, far right column:

$335,977,000 Total Endowment Net Assets (June 2009)
$521,199,000 Total Endowment Net Assets (June 2008)

It’s a 36% year to year decline. The actual investment loss was 32.8%, then you have subtractions for operating draw and additions for gifts.

BTW, Bowdoin and Middlebury have posted their year end reports, too. Nothing stood out about Bowdoin except high cash call commitments (relative to their endowment size) and they borrowed $20 million in taxable bond debt in May 2009. I haven’t looked at Middlebury.

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#1 Comment By rory On October 26, 2009 @ 12:35 pm

@hwc: wow. any hope of (some?) recovery for Haverford since June 30th? And what will this do to the tri-college situation if Haverford gets screwed but Swarthmore does well? Will Haverford and its students rely more on the consortium and potentially drain some resources from Swarthmore and Bryn Mawr?

wow.

#2 Comment By hwc On October 26, 2009 @ 1:41 pm

I don’t know. Bryn Mawr hasn’t said much about its financials, yet!

I don’t see much impact on Swarthmore. In recent years, about 40 Swarthmore students take a course at either Bryn Mawr or Haverford in a typical semester. About 80 students from Bryn Mawr/Haverford take a course at Swarthore. So, it’s a net drain on Swarthmore, but those numbers are pretty negligible when you figure there are close to 6000 seats in courses at Swarthmore each semester. I believe that Swarthmore students already get preference for courses that are full, so additional demand from Bryn Mawr/Haverford wouldn’t be met in popular courses.

The Haverford/Bryn Mawr exchange is anything but negligible. They have actually divvy’d up departments so, for example, Haverford offers Studio Art while Bryn Mawr offers Art History. Haverford offers Religion while Bryn Mawr offers Italian nd Russian. Approximately 700 Bryn Mawr students take courses at Haverford each semester and vice versa. They really operate as a pair academically. It’s a smart approach and definitely extends the bang for the buck at both schools.

Financial considerations are the reason that Swarthmore doesn’t push for (and probably resists) more consortium arrangements. Just like Pomona in the Claremont Consortium, the wealthiest college shoulders the biggest cost and derives the least net benefit. Most of the consortium deals have been packaged with a nice bow as “cutting edge cooperative initiatives” ™ and funded by foundation grants. Swarthmore has been successful getting major foundation grants (Carnegie, etc.) for things like consortium library projects, Tri-co arabic programs, etc. That won’t really change.

You would think it would hurt in terms of library journal subscriptions, but the pricing policies on those actually serves as an impediment to consortium sharing.

Swarthmore is due to release its long-range cost-cutting committee draft recommendations in three weeks (for FY2011 and beyond). We’ll see if there is anything about the consortium costs. I don’t think the dollars are significant.

#3 Comment By Jr. Mom On October 26, 2009 @ 1:56 pm

@hwc:

My son and I visited Haverford. He spent the night in a dorm there, while I stayed over at Bryn Mawr. He quite liked the school.

The reason I bring it up is that I remember how sleek the campus was. They had just spent oodles on new construction. In particular, I remember very posh buildings for athletics; new offices and workout facilities. In comparison Williams seemed much more worn. We decided it was an appealing “patina”. ;-)

#4 Comment By hwc On October 26, 2009 @ 2:16 pm

Everyone’s endowments bounced back in the final months of the fiscal year and have continued in a positive direction since that time. As I’ve been saying, a lot of bacon has been pulled from fire by that market recovery. Without the recovery, Haverford’ endowment losses would have been 40%+.

As for year end per student endowment numbers, Pomona took a hit, but is still number one (their numbers are contradictory in this weeks newspaper, but it appears they had a 22% investment loss minus whatever they took for operating expenses.).

Grinnell got murdered. They fell from #2 to #5 in per student endowment. They give great financial report, so I’m looking forward to their management discussion.

Amherst is probably #2 (I can’t pin down their new enrollment) if you pretend that they didn’t borrow $100 million instead of taking an endowment draw for the next two years. Smoke and mirrors aside, they have taken a beating. I think their core undergrad program will be degraded over the next five years. They will match every cut Williams makes instantly and sing halleluhah.

Swarthmore improved its relative position. It’s essentially tied with Amherst in per student endowment, jumping up to #2 in real terms after accounting for Amherst’s funny-money. This year’s budgeted endowment spending rate of 4.1% is astonishing.

Williams improved its position similarly, moving above Grinnell and essentially tying Amherst in the real world (although not in Tony Marx fantasy-land). Spending looks OK. The cuts that are inevitable should be manageable.

Then comes Grinell and Wellesley in fairly close order before a pretty big drop back to Bowdoin, Smith, Claremont-McKenna, Haverford, Harvey Mudd, Vassar, and beyond.

I’m looking for bleak financial reports from Wesleyan, Smith, Vassar, Middlebury, and Oberlin. All of those were already gasping for air after diluting their endowments with enrollment growth. I believe all of them are cutting bone and muscle out of their programs.

#5 Comment By hwc On October 26, 2009 @ 2:57 pm

Jr. Mom:

That’s a little bit of an illusion. They blinded you with the only two new buildings they’ve built in decades. The long overdue athletics facility. That didn’t replace old facilities. They haven’t even had a swimming pool on campus. And they built a new science center.

Otherwise, the campus is missing a lot of the facilities that a place like Wiliams offers: theater space, student center type spaces, etc.

Haverford took a beating in the 1970s recession with an ill-timed growth plan that didn’t materialize. It’s taken them 30 years to recover. This endowment hit must be devastating.

They already charge considerable more than Williams and Swarthmore, while spending considerably less. I think what is happening here is that the tier just below Amherst, Pomona, Swarthmore, and Williams is going to have to drop any pretense of matching them dollar for dollar. For example Vassar simply cannot afford to stay need-blind.

#6 Comment By Parent ’12 On October 26, 2009 @ 6:23 pm

@hwc:

I always appreciate your updates on endowments.

Could you do me a favor with the list of most endowment per student…

What was the order of the list…. & if there were an “HWC ranking,” based on the most recent figures, how would you order the schools.

As for Haverford, that’s very painful. Similar to Jr. Mom, I remember the new buildings, such as the science structure. I also remember the sparse landscaping around them, thinking that in a decade or so, as the plants flourished, the new buildings would feel more a part of the campus. This was particularly acute by the new admissions-bookstore-snack bar building across from the athletic structure. I wonder how long it will take for Haverford to recover.

#7 Comment By hwc On October 26, 2009 @ 9:06 pm

This is really, really rough:

a) some of the endowment numbers were from estimates in news articles or reported as “a 22% decline”. The numbers aren’t always precise, even if they may look like it.

b) I have not subtracted any of the credit card borrowing against the endowmnents to meet payroll at Havard, Yale, Princeton, Stanford, Dartmouth, Columbia, Duke, and Amherst. In reality, these schools are all reporting signficantly inflated numbers. If I were analyzing a school or schools, I would back the debt numbers out. I just have no way to consistently do it.

c) Except for a couple of instances (Swarthmore’s actual new number and an estimate for Amherst), I’m using 2007 enrollment. With so many schools increasing enrollment, I think it’s important to use the new numbers. It’s just unbelievable how hard it is to get accurate data on that most simple of all statistics. The numbers include all students (undergrad, grad, and professional schools).

d) CalTech is plugged in where it has tradiitonally fallen in the list. The other schools with a zero endowment will sprinkle into the list below Bowdoin. I just haven’t found (or looked for) endowment numbers for all of them.

e) I can’t give you my ranking because I don’t have one. I think in terms of tiers, for example, Amherst (pre-crash), Williams, Swarthmore, and Pomona are equal IMO with any finer granularity depending entirely on a student’s priorities including location, area of emphasis, etc. They are all a little different. In general terms, I think per student endowment is probably as accurate a ranking system as any that could be imagined. Everything ultimately flows from available resources and that is especially true now.

$1,735,298 Princeton University
$1,445,933 Yale University
$1,332,445 Harvard University
$882,909 Stanford University
$872,657 Pomona College
$776,774 Massachusetts Institute of Technology
$759,420 Amherst College
$745,215 Swarthmore College
$0 California Institute of Technology
$686,275 Williams College
$677,757 Grinnell College
$676,157 Rice University
$558,534 Wellesley College
$487,296 Dartmouth College
$473,770 University of Notre Dame
$413,397 University of Chicago
$402,632 Bowdoin College
$399,718 University of Richmond
$381,471 Washington University in St Louis
$370,045 Emory University
$366,667 Smith College
$353,251 Northwestern University
$333,384 Duke University
$292,203 Columbia University in the City of New York
$287,405 Haverford College
$281,583 Harvey Mudd College
$280,808 Middlebury College
$274,200 Vassar College
$273,823 Wabash College
$267,461 University of Pennsylvania
$259,873 Brown University
$259,278 Carleton College
$252,093 Vanderbilt University
$0 Bryn Mawr College
$0 Claremont McKenna College
$0 Berry College
$0 Trinity University
$0 Agnes Scott College
$0 Macalester College
$0 Lafayette College
$0 Oberlin College
$0 Colby College
$0 Reed College
$0 Washington and Lee University

#8 Comment By Ronit On October 26, 2009 @ 9:35 pm

Request to hwc and other authors: when you have something substantive to post, post it on the mainpage instead of Speak Up, please.

#9 Comment By Parent ’12 On October 26, 2009 @ 10:11 pm

@hwc:

Wow- More institutions than I expected. You’re really quite something.

And, the list.. I didn’t expect places like Columbia, Penn, & Brown to be in those positions in the list. Especially the way Columbia’s real estate is expanding, unless that’s affected the endowment. I’m surprised Chicago’s estimate is higher relative to those 3 institutions.

As for Amherst, that figure does or does not take into account their new debt?

And, with “hwc ranking” the list is what I meant: Institutions in order, based on your estimate.

BTW, I bet that the order also correlates highly with financial aid policy, especially as it affects “no loan” policy.

#10 Comment By Parent ’12 On October 26, 2009 @ 10:18 pm

I didn’t see that you did not apply “credit card borrowing against the endowmments” to Amherst. So, Amherst’s figure does not account for the recent debt incurred because of the endowment decline.

#11 Comment By hwc On October 26, 2009 @ 11:34 pm

Parent:

No debt is factored into the numbers. Keep in mind that undergrads at universities get less than their equal share of spending. If there were a way to back out the grad schools, the actual undergrad resources would be smaller than shown.

I just had a spreadsheet of 2007 endowments and enrollments I had downloaded from IPEDS a while back. A Google News alert on “endowment” popped up any news article with an endowment figure, so it was simple to just update the spreadsheet. What you see is about the extent of what I have so far.

Ronit:

I won’t post on the main page unless it is specifically and exclusively about Williams. I didn’t see a blurb about Haverford’s endowment as fitting that criteria, although I thought it would probably interesting given the magnitude of the losses.

#12 Comment By hwc On October 26, 2009 @ 11:41 pm

BTW, I haven’t figured out what the heck happened to Haverford’s endowment. There is a cryptic little note that they had 50% of their holdings with a single index fund investment house at the start of the fiscal year, 34% at the end of the year. I’m guessing they got killed with an S&P index fund. I don’t know. I feel bad for them. From everything I’ve seen, it’s a well-managed school that hasn’t done a lot of crazy stuff. They stick to their core and do a good job.

#13 Comment By frank uible On October 27, 2009 @ 1:08 am

Due to the vagaries of financial performance Haverford has travelled in 60 years from a tier 1 position to a tier 3 – sad but life in the real world – here except for the grace of God would have gone Williams.

#14 Comment By hwc On October 27, 2009 @ 1:25 am

Due to the vagaries of financial performance Haverford has travelled in 60 years from a tier 1 position to a tier 3 – sad but life in the real world – here except for the grace of God would have gone Williams.

Yep. In 1970, Haverford had a larger per student endowment than Swarthmore (or probably Williams). Williams made the same enrollment moves, but by going coed had the demand and didn’t have to spend down their endowment when the enrollment didn’t materialize. Hsverford tried it without going coed just as the bottom fell out of the baby boom market.

Somebody asked how long will it take to recover? They never really recover.

My only quibble would be that Haverford is solidly Tier 2. I would put it on par with Bowdoin, Wesleyan, Carleton.

#15 Comment By frank uible On October 27, 2009 @ 7:17 am

Ahead of Grinnell? Claremont? Davidson? W&L? Mudd?

#16 Comment By Aidan On October 27, 2009 @ 10:22 am

is there a link to this document?

#17 Comment By Patrick On October 27, 2009 @ 11:38 am

hwc — where did you find reference to a 35% decline in Haverford’s endowment?

#18 Comment By hwc On October 27, 2009 @ 11:56 am

Link:

Haverford 2008-2009 Annual Report (PDF)

Page 13, far right column:

$335,977,000 Total Endowment Net Assets (June 2009)
$521,199,000 Total Endowment Net Assets (June 2008)

It’s a 36% year to year decline. The actual investment loss was 32.8%, then you have subtractions for operating draw and additions for gifts.

BTW, Bowdoin and Middlebury have posted their year end reports, too. Nothing stood out about Bowdoin except high cash call commitments (relative to their endowment size) and they borrowed $20 million in taxable bond debt in May 2009. I haven’t looked at Middlebury.

#19 Comment By hwc On October 27, 2009 @ 12:10 pm

Frank:

I would consider Haverford an equal of borderline Tier 1/Tier 2 schools like Grinnell and Claremont McKenna.

I would rank Haverford above Davidson and I’m very familiar with Davidson.

I really don’t look at Harvey Mudd as a liberal arts college. It’s an undergrad tech school, actually more like CalTech than any LAC.

I don’t hold Washington & Lee in very high regard. It is lily-white (87%). Has the highest fraternity/sorority membership in the United States (79%/77%, respectively), and the student body was vocally embarrassed and made efforts to correct the situation when the school lost its #1 ranking in the Princeton Review’s Whiskey flows like water category.

#20 Comment By Ronit On October 27, 2009 @ 12:12 pm

@hwc: I’ve always heard of Washington & Lee as the Williams, or the wannabe-Williams, of the South.

#21 Comment By hwc On October 27, 2009 @ 12:27 pm

I’ve always heard of Washington & Lee as the Williams, or the wannabe-Williams, of the South.

Hah. I was Vice President of the student council at my prep school, lost the election to Beauregard Jefferson Davis VII. Beauregard went to W&L and was the embodiment of the college’s description in Fiske Guide: “the last bastion of the southern gentleman who can hold his liquor and is damn proud of it.”

I would hope that Williams College isn’t compared to a school that has that as its opening sentence description in the most respected college guidebook in the country.

I think Davidson is the closer southern comparison to Williams.

#22 Comment By rory On October 27, 2009 @ 12:35 pm

@hwc: I have to admit, but if I were a “southern gentleman who could hold his liquor” I would be damn proud of it too.

lol.

#23 Comment By Ronit On October 27, 2009 @ 12:37 pm

I have pride in Ephs’ ability to hold their liquor. It’s one of the things that makes us unique.

#24 Comment By Vicarious’83 On October 27, 2009 @ 12:39 pm

@hwc: Interesting to see W&L make it into the conversation. It recently received a $100 million gift which it uses to offer full tuition, room & board merit scholarships to approximately 10% of its incoming classes. It’s called the Johnson Scholarship, and I think it’s fairly new. We received quite a bit of marketing materials from W&L on this scholarship during our college search period. It appears W&L is using this to attract lots of new applications and increase its selectivity ratios. Don’t know if it’s also looking to alter the makeup of its student body.

#25 Comment By frank uible On October 27, 2009 @ 12:54 pm

Isn’t the “hold your liquor” thing a matter of tongue in cheek? If not, in my view it’s a negative.

#26 Comment By hwc On October 27, 2009 @ 1:00 pm

Sounds like W&L has jumped big time into the merit aid game. It will be interesting to see if they make any effort to use that $2 million a year in financial aid discounts to attract even a smidgeon of diversity. W&L is whiter today than Williams was 30 years ago. A college would almost have to make a concerted effort to be that white.

Rory/Ronit:

Well, maybe Wiliams and W&L are more alike than I thought. Fiske Guide does mention the drinking/hard partying scene at Williams.

#27 Comment By hwc On October 27, 2009 @ 1:05 pm

Isn’t the “hold your liquor” thing a matter of tongue in cheek? If not, in my view it’s a negative.

I wouldn’t pay $50,000 a year for my kid to attend a college that takes it as a matter of pride to be #1 in the “whiskey flows like water” category, but that’s just me. If they wanna go drink for four years, move out, get a job, and have at it. $200,000 is too much money to throw away on a kid or a college that isn’t serious about taking advantage of a learning opportunity. Read some of the stories about what the classroom at W&L is like during hazing mmonth.

#28 Comment By Ronit On October 27, 2009 @ 1:14 pm

@hwc: I’ve heard plenty of good things about W&L’s academics. It seems like a serious liberal arts college with ambitions of greatness.

@frank uible: Agreed about the tongue in cheek thing.

I wouldn’t pay $50,000 a year for my kid to attend a college that lacks a sense of humor.

#29 Comment By ce On October 27, 2009 @ 2:32 pm

Where do these $100 million gifts come from and why is it that Williams never seems to get any? Do we not have as many uber rich alums as some of these other schools? Are we not as effective at fundraising? It’s always struck me as surprising that schools that (I thought) didn’t have quite as wealthy or connected of an alumni base routinely receive gifts of $50+ million, while at Williams gifts seem to max out in the $15-20 million range.

#30 Comment By ce On October 27, 2009 @ 2:33 pm

(PS and yes, I know that W&L probably has a very wealthy and connected alumni…but more so than Williams? Also, my question was referring more in general than to W&L specifically).

#31 Comment By hwc On October 27, 2009 @ 2:48 pm

Just to be clear. The statement that W&L is “the last bastion of the southern gentleman who can hold his liquor and is damn proud of it” did not come from W&L. That is the first sentence, the one sentence bullet point, written by the authors of the Fiske Guide to describe the college. It is the “take-away” branding for any student leafing through the highly respected, and far and away the best, college guidebook. It’s not really the brand a college wants.

Think about it. We are in the car, heading to look around W&L’s campus. My daughter was not god’s gift to college applicants, but she was an OK applicant in the overall pool. I most liberal arts colleges of W&L’s ranking would like to have a shot at students like that. Top class rank. Decent test scores. Community service that earned her state ecognition in a national awards program. Placed in the state science fair at MIT. She was a decent applicant. So we’re in the car, and as we did driving to each school, we were reading the college guidebook entries outloud — Fiske Guide, I think we had Princeton Review. Just to kind of set the stage for the next visit, get our bearings a little bit, kill some time. I can tell you that reading the opening sentence, “The last bastion of the southern gentleman who can hold his liquor and is damn proud of it” is not a effective pitch to a female applicant from Masachusetts or her mother who works at a fairly well-respected university. I mean the process worked. It wasn’t a good fit for my daughter and she never considered applying to W&L. She probably would have gone to UMASS first. If I’m looking at it from the college’s standpoint, I’m not sure that I’d be happy about not even getting a shot at making her college list, especially given that we were on a college tour, specfically looking to find some southern schools, and that four (maybe five) southern schools made her final list, including Davidson.

But, this has nothing to do with Haverford’s endowment performance, so it’s really neither here nor there.

#32 Comment By hwc On October 27, 2009 @ 4:01 pm

Colleges don’t “routinely” receive gifts of $50 million or $30 million or $10 million.

#33 Comment By ce On October 27, 2009 @ 4:27 pm

I know that any one college will not routinely receive gifts of that size…but it does seem that in any given year, SOME college is getting a gift of $50+ million. Maybe I’m wrong there.

#34 Comment By Parent ’12 On October 27, 2009 @ 5:27 pm

hwc- Although I know what you mean by

“…undergrads at universities get less than their equal share of spending. If there were a way to back out the grad schools, the actual undergrad resources would be smaller than shown.”

There are some advantages, particularly if there’s an affiliated medical school attached to the university. At least in the past student health services was better at UCLA than at a campus like UC Santa Barbara. Also, the library resources are better.

Your list is impressive. Again, I’m puzzled by Columbia’s figure in the context of the entire list.

Thank you for sharing your updated spreadsheet. How long have you been gather data?

#35 Comment By BHC On October 27, 2009 @ 6:36 pm

A recently updated Bryn Mawr webpage page states that their endowment was $ 523.5 million as of 05/31/09. If so, they may be in healthier financial shape than Haverford appears to be in.

#36 Comment By hwc On October 27, 2009 @ 8:35 pm

The figure I’ve seen is that universities spend $2 on each med school student for each $1 they spend on each undergrad.

I started grabbing endowment numbers I saw back in August when the Harvard stories started up. I just kept my eye out.

#37 Comment By Parent ’12 On October 27, 2009 @ 9:11 pm

It’s definitely much more expensive to train a medical student or a resident or a fellow than an undergraduate. My point was that undergraduates can benefit from the resources, such as the libraries, that are part of the medical school or the graduate programs.

#38 Comment By hwc On October 27, 2009 @ 11:12 pm

My point was that undergraduates can benefit from the resources, such as the libraries, that are part of the medical school or the graduate programs.

Maybe every once in a blue moon. Usually the medical schools aren’t even located in the same place. I would be very surprised if Harvard undergrads make it over the med school very often.

I’ve seen a research study on the library circulation numbers at three top liberal arts colleges. I don’t think the average undergrad student is in any danger of running out of books in the library.

Anyway, I think Brown, UPENN, and Columbia benefit enormously from location and sports conference affiliation. I view them as pretty much comparable to Duke, Emory, and Vanderbilt. I have seen nothing to suggest that Penn or Columbia offers a very good undergraduate program.

#39 Comment By hwc On October 27, 2009 @ 11:18 pm

Thanks for the Bryn Mawr number. Their endowment probably increased a bit more in June. That number should put them pretty much in a dead heat with Duke University on the per student endowment number.

Bryn Mawr is a very good school. I’m told the campus is stunning.

#40 Comment By hwc On October 28, 2009 @ 4:08 pm

Bryn Mawr has posted its year end financials. It looks like its in pretty good shape. Endowment losses were in line with the majority. Nothing really eye-catching about debt or cash call commitments. Endowment spending was low-ish in the year that just finished (4.5%) and it looks like they should be able to stay under their (5.5%) ceiling for the new year.

#41 Comment By (d)avid On October 29, 2009 @ 9:22 am

Interesting discussion. Thanks, hwc.