With the 2010 financial statements just off the presses I thought it might be interesting to try to construct a side-by-side comparison of the Williams and Amherst endowments.

Here’s my attempt: Comparison of Amherst & Williams Endowments: 6/30/2010

I’ve tried to group the various assets in each endowment to allow for some rough comparisons. At the bottom of the page I’ve computed some ratios that I find interesting.

Observations:

1) Amherst is more aggressively invested and has less flexibility over its aset allocation.

The key thing here is how much each school has in “Level III” assets, and how much additional cash each can be required to invest in these assets. The values that colleges report for their Level III assets, literally, are educated guesses, and nothing more, and the state of financial reporting on them, while improving, is still poor.

2) Despite its heavier investment in illiquid, Level III assets, Amherst says it expects a long-term return of about 6.8%. Williams puts its expected long-term return at 8%.

3) Last year in the management discussion, Amherst showed that its target and actual asset allocations were kind of far apart. This year there is no discussion of its target and actual asset allocations. Williams did disclose its target allocations in the notes to its financial statements, and its actual allocation seems to be reasonably in line with the target.

4) Amherst’s unfunded cash calls are 53% of its combined Level I & II assets, compared to 30% for Williams. This would only be a concern when cash calls exceed distributions from Level III assets. When that happens (as it did last year for Amherst) one has to go to the Level I & II assets.

I don’t consider myself an expert at analyzing a college’s financial performance. This is simply a lay person’s attempt to read and understand via a seat-of-the-pants camparative method. I believe that the important decisions, regarding things like admissions & financial aid policy, staffing levels, salary freezes, construction plans, etc., are influenced more by the trustees’ expectations about the near-term prospects for the endowment than by any other single factor.

It seems at this point that Williams Trustees seem to feel that the worst is behind us endowment-wise, and that Amherst feels that it has a lot of heavy lifting to do. I’m very interested to know whether other Ephs and Jeffs have a different take.

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