Tulane Endowment Down 38%

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McWave
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Fri Sep 30, 2016 9:22 am

Has anyone seen what the TU Endowment returned this past fiscal year? that would be as of June 30, 2016.


Aberzombie1892
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Fri Sep 30, 2016 9:26 am

It doesn't appear as though it is officially out yet.

https://www2.tulane.edu/tef/annual_reports.cfm
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ajcalhoun
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Fri Sep 30, 2016 9:41 am

They should let jj take charge of it. He knows everything.
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mbawavefan12
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Fri Sep 30, 2016 10:02 am

ajcalhoun wrote:They should let jj take charge of it. He knows everything.
It is managed by a private hedge fund group. The returns the last few years (tmk) were below the S&P. They clearly failed their fiduciary responsibility, where are the lawyers?
JerseyWave
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Fri Sep 30, 2016 11:24 am

They should check the Cowen's financial portfolio.
jonathanjoseph
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Fri Sep 30, 2016 12:07 pm

mbawavefan12 wrote:
ajcalhoun wrote:They should let jj take charge of it. He knows everything.
It is managed by a private hedge fund group. The returns the last few years (tmk) were below the S&P. They clearly failed their fiduciary responsibility, where are the lawyers?
You discredit your argument by making a caricature of it. Of course I've never said anything along those lines.

Now if those money managers have some personal or outside tie to Cowen......that would be a different story.
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tpstulane
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Fri Sep 30, 2016 2:41 pm

Should have put it all in AMZN.
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McWave
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Thu Jun 29, 2017 11:34 am

I read some data on the TU endowment here and came across the following text on Wikipedia...if true, this is extremely concerning.

The following are expressed in the Staff Advisory Council March 2009 minutes: (read and weep :shakingno:)

"Fund raising has been abysmal"
"Endowment has lost close to 37%"

The S&P 500 Index (US Stocks) was down:
36.3% from June 30, 2008 - March 31, 2009
38.1% from March 31, 2008 - March 31, 2009
I assume either is the period referenced by Yvette Jones in the minutes.

If these minutes are accurate (and please tell me they are not), it is extremely sad if not criminal. Fiduciary responsibility to the endowment was not followed. I am flabbergasted.

Tell me you can't believe everything you read on the internet.

Here's the Wikipedia reference link:

http://tulane.edu/sac/upload/SAC-Minutes-3-12-2009.doc

"Tulane University Staff Advisory Council: Minutes of Thursday, March 12, 2009" (DOC). Tulane University. March 12, 2009. Retrieved 2009-04-29. "Tulane made some hard decisions after Katrina, and we are not in as difficult position that many institutions are in now. We are conditioned in times like this because of how we have worked so long. Endowment has lost close to 38%, the income off of that is only 6% of our revenue base. The challenge is the endowments whose market value is lower and we cannot pay out on, but generally we are in good shape."
Aberzombie1892
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Thu Jun 29, 2017 12:01 pm

This was the result of the Great Recession due to all of the risky mortgages that lenders made and this deeply impacted virtually all universities. Even Harvard's endowment experienced a drop from $36.9B to $26B.

Tulane's endowment growth has been inline with private institutions since 1990, so, if Tulane was ever on the same level as the other high profile southern private schools, it fell behind sometime before that year.

http://harvardmagazine.com/2009/09/shar ... e-reported
McWave
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Thu Jun 29, 2017 12:37 pm

Harvard to Lay Off Half its Endowment Staff, Outsource Bulk of Assets

http://fundfire.com/pc/1551253/179813

I don't think I would point to Harvard as a good benchmark given its recent track record.

Harvard, which has the largest school endowment in the world, has lagged its rivals in recent years, hitting just 5.7% in annualized gains in the decade ending June 30 – the second lowest within the Ivy League. Yale and Columbia both hit 8.1% for the same period, the Journal reports

Investing in only risky fixed income (risky mortgages) and equity (which by nature is risky) is not prudent (i.e. 50% risky fixed income and 50% equity :roll: ). A prudent portfolio balances risks and return. Losing as much as the S&P 500 Index means you had a lot of "risky" assets in the portfolio. As such, I would expect the past eight years should have been phenomenal returns. The S&P500 Index since April 2009 (3/31/09 - 5/31/17) earned 16.9% annualized or 258.0% cumulative. I don't think TU participated in the upside as much as the downside. Not a good risk reward setup. Please ease my concerns with a TU annualized 17% return press release since the 38% loss.
Aberzombie1892
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Thu Jun 29, 2017 1:03 pm

McWave wrote:Harvard to Lay Off Half its Endowment Staff, Outsource Bulk of Assets

http://fundfire.com/pc/1551253/179813

I don't think I would point to Harvard as a good benchmark given its recent track record.

Harvard, which has the largest school endowment in the world, has lagged its rivals in recent years, hitting just 5.7% in annualized gains in the decade ending June 30 – the second lowest within the Ivy League. Yale and Columbia both hit 8.1% for the same period, the Journal reports

Investing in only risky fixed income (risky mortgages) and equity (which by nature is risky) is not prudent (i.e. 50% risky fixed income and 50% equity :roll: ). A prudent portfolio balances risks and return. Losing as much as the S&P 500 Index means you had a lot of "risky" assets in the portfolio. As such, I would expect the past eight years should have been phenomenal returns. The S&P500 Index since April 2009 (3/31/09 - 5/31/17) earned 16.9% annualized or 258.0% cumulative. I don't think TU participated in the upside as much as the downside. Not a good risk reward setup. Please ease my concerns with a TU annualized 17% return press release since the 38% loss.
Harvard isn't a model benchmark for endowment gains, but Harvard also isn't a peer to Tulane - it was just selected since it's easily recognizable.

Let's take a look at percentage change in the size of the endowment from 2008-2009 and 2009-2010 among Tulane and historical peer schools.

Percentage change in endowment from 08-09
Tulane -23.3%
Duke -27.5%
WashU -23.7%
Rice -21.6%
Vanderbilt -18.9%
Emory -20.9%

Tulane is largely inline here - smaller percentage loss than Duke or WashU but greater than Rice, Vanderbilt, and Emory.

Percentage change in endowment from 09-10
Tulane 10%
Duke 8.6%
WashU 9.6%
Rice 4.8%
Vanderbilt 6.2%
Emory 8.5%

Tulane had the largest increase among Tulane, Duke, WashU, Rice, Vanderbilt, and Emory.

Honestly, I'm not sure what else someone would want.

http://www.nacubo.org/Research/NACUBO-C ... ments.html
Wave755
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Thu Jun 29, 2017 1:32 pm

And, the same Wikipedia states Tulane's present endowment as $1.171 billion (2016).
McWave
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Thu Jun 29, 2017 1:53 pm

I agree Harvard is its own animal. I was just responding to your analysis.

Change in assets from year to year is due to (1) investment return (2) contributions and (3) spending. Your analysis assumes it all came from investments. My concern was regarding Ms. Jones 37% loss quote. A 37% investment loss seems odd when the S&P 500 Index lost somewhere between 36-38% at the time she made the comment. But it could have included spending which is not clear as I reread her statement. Spending usually runs in the 4-6% range. I don't know what it is at TU.

Based on the 2 year change in assets (2008-2009 and 2009-2010): TU falls above median over the 2008-2010 period (compound return):

Emory -12.4%
Vandy -12.7%
TU -13.3%
WU -14.1%
Rice -16.8%
Duke -18.9%

I would prefer to have Emory or Vandy's return to answer you question. But I guess it's better than WU, Rice, or Duke.

I appreciate your NACUBO research. Thanks for making me aware of that site.
Aberzombie1892
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Thu Jun 29, 2017 2:05 pm

Of course. What else is a forum good for if it's not for sharing information (aside from expressing frustration/disappointment)?

As for Tulane, its endowment growth has been acceptable when compared to its 5 historical peers, and the issue seems to be that Tulane started with significantly less than them as of 1990. Honestly, it's actually slightly impressive given that the endowment survived Hurricane Katrina and its aftereffects and its growth still managed to be in line with the growth of other private universities.
Robert1969
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Thu Jun 29, 2017 2:17 pm

Why are we talking about endowment numbers from 2009? I saw this headline, assumed it was recrent, and damned near had a heart attack! How could that even be possible with today's market?

Oh wait, they are talking about the time of the financial crash? Oh well. Old news, and not at all shocking given the circumstance.
McWave
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Thu Jun 29, 2017 2:19 pm

NACUBO also lists the average and median US College and University Endowment and Affiliated Foundation net investment rates of return for FY 2016 to 2007 (by fiscal year). Data base appears to cover over 550 institutions.

The 2010 FY average and median returns were 11.9% and 12.1%, respectively.
The 2009 FY average and median returns were -18.7 and -19.1%, respectively.
Tulane 2010 FY (YOY asset change) 10.0%
Tulane 2009 FY (YOY asset change) -23.3%

Average 2 year compound investment return: -6.8%
Median 2 year compound investment return: -7.0%
Tulane 2 year compound investment return: -13.3

I am not sure why your southern peer group did so poor but it was well below the average and median.

I'll restate my preference. I prefer the average or median US College and University Endowment returns. But without TU investment only returns, inconclusive. Very interesting site NACUBO.
Aberzombie1892
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Thu Jun 29, 2017 2:37 pm

McWave wrote:NACUBO also lists the average and median US College and University Endowment and Affiliated Foundation net investment rates of return for FY 2016 to 2007 (by fiscal year). Data base appears to cover over 550 institutions.

The 2010 FY average and median returns were 11.9% and 12.1%, respectively.
The 2009 FY average and median returns were -18.7 and -19.1%, respectively.
Tulane 2010 FY (YOY asset change) 10.0%
Tulane 2009 FY (YOY asset change) -23.3%

Average 2 year compound investment return: -6.8%
Median 2 year compound investment return: -7.0%
Tulane 2 year compound investment return: -13.3

I am not sure why your southern peer group did so poor but it was well below the average and median.

I'll restate my preference. I prefer the average or median US College and University Endowment returns. But without TU investment only returns, inconclusive. Very interesting site NACUBO.
This is where is gets tricky and a little more complicated. It would be unfair to compare Tulane's endowment to universities that were not either (1) historical peers that are seen as the benchmarks for the region in terms of the size of their endowments (WashU/Rice/Vanderbilt/Duke/Emory) or (2) similar private institutions that historically have had similarly sized endowments in the verifiable past (Tulsa/Baylor/Miami/SMU/et al) since those two groups have enough in common with Tulane to draw various conclusions about Tulane's performance and where Tulane sits in the hierarchy in the region. Moving beyond that and looking further at information that is available, the endowments of public universities have been growing at an faster rate than private schools. Because I'm not going to sit around in aggregate all of the data, I'm going to look at the top 50 schools by endowment in 1990 and compare it to the top 50 schools in terms of endowment in 2015 and only note the public institutions.

Public schools in the top 50* in 1990:
University of Texas
University of Virginia
University of Michigan
Ohio State University
University of Cincinnati
University of Minnesota

*The University of Pittsburgh was not counted as a public school here due to its status as a "State Related" institution in that the state gives money to the privately controlled university in exchange for the university charging lower tuition for in-state students.
*The University of Delaware was not counted as a public school for similar reasons.

Public schools in the top 50* in 2015:
University of Texas
Texas A&M University
University of Michigan
University of Virginia
University of California-Berkeley
Ohio State University
University of Washington
University of Minnesota
University of North Carolina - Chapel Hill
University of Wisconsin
Purdue University
University of Illinois
Michigan State University
Indiana University
University of California-Los Angeles
Georgia Institute of Technology

*The University of Pittsburgh was not counted as a public school for the same reasons as above.
*The University of Delaware was not in the top 50 in 2015, so it would not have been counted either way.
* Penn State University, which appeared in the top 50 in 2015 but not in 1990, was not counted as public for the same reasons as the University of Pittsburgh.

Basically, in 1990, there were 6 public institutions in the top 50, and, in 2015, there were 16
. That's almost tripling the amount of public universities in the top 50 during that time. It looks like private institutions have generally been at a significant disadvantage to endowment growth as compared to public institutions since 1990.
McWave
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Thu Jun 29, 2017 3:21 pm

US stocks (S&P 500 Index) up 17.4% since June 30, 2016. One day remains in the current fiscal year. Let's hope FY 2017 benefited substantially from the US equity markets.
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Thu Jun 29, 2017 11:42 pm

To me Money is money. Peer institutions do not matter. Everyone with 1$b dollar endowment should be compared to each other regardless of public vs private. Everyone can invest in same things regardless if one is a public or private institution. The only ones that I wouldn't include is the top 5 as they have significantly more purchasing power.

In 1990 tulane was ranked 59th, by 1995 we were ranked 71st. Someone should have been fired then and I hope they were. Since 1995 though, tulane had been in 70s and have had avg returns compared to others. Our ranking has been constant for the most part.

Public university's are soaring thru the ranks because they are held accountable by the states much more so than privates who are notorious to hiring good ole boys and keeping them for 30years with little accountability. All of public univ endowments have to be outsourced usually and they all answer to the governor and the board of regents appointed by the respective states as well as school president etc.

I think some of it has to also do with Public institutions in general having much larger alum bases to raise money from hence the higher returns.

Tulane is in drastic need of a multi billion dollar campaign to raise funds as all our peers are currently doing this.

Let's see if this new president attorney we hired will help us. He needs to announce a fundraiser yesterday. Only thing I've seen him and his staff do is hire a firm to check out the accessibility of our campus for a master plan......and all we got was this firm telling us where our students lived and that we need brighter light bulbs on the sidewalks at night. Wasted money. I've never talked to the guy, but if he's a brick wall and can't talk to people then he needs to hire a chancellor/fundraiser to make this happen.

This is what will improve our Univeristy.for generations....2$billion+ dollar added to our endowment thru fundraising moves the needle. Someone make this happen please. I posted 5+ examples in other thread of universities doing this as we speak. Universities of similar standing have raised 2$B in 1 year.....why not us?
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Fri Jun 30, 2017 6:48 am

There was a fundraising campaign announced about a year or two ago. The goal was $1 billion over 10 years. Nothing heard since.
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Fri Jun 30, 2017 9:57 am

Well, we all also need to keep in mind that a lot of the wealthiest universities have had relatively unique circumstances that led to the size of their endowments and it's unreasonable for Tulane alumni to argue that Tulane should have experienced those unique circumstances since many of those circumstances were the result of either (1) circumstances outside the control of the university or (2) sheer luck.

Emory is a perfect example of this. Prior to 1979, Emory was largely irrelevant, but, during that year, Robert Woodruff donated $105M worth of Coke stock to the university. At the time the gift was made, it was the largest gift made to any institution of higher education in American history. By today, the value of that gift has increased from that $105M to around ~$5B. So, basically, that -one- gift of stock, and the subsequent luck in the increase in value of the underlying stock, is what separated Emory from being "Emory" and Emory being largely irrelevant. It's well known that Emory wasn't added to the AAU until 1995, which was significantly later than almost all of the members, and the benefits of that gift is what placed Emory in the position to gain admission.

There is virtually nothing Emory could have done to compel Woodruff to make that gift or to ensure that the value of the stock increased once it received it. As a result, Emory is where it is because of a combination of circumstances that took place beyond its control and sheer luck.
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tpstulane
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Fri Jun 30, 2017 10:57 am

Aberzombie1892 wrote:Well, we all also need to keep in mind that a lot of the wealthiest universities have had relatively unique circumstances that led to the size of their endowments and it's unreasonable for Tulane alumni to argue that Tulane should have experienced those unique circumstances since many of those circumstances were the result of either (1) circumstances outside the control of the university or (2) sheer luck.

Emory is a perfect example of this. Prior to 1979, Emory was largely irrelevant, but, during that year, Robert Woodruff donated $105M worth of Coke stock to the university. At the time the gift was made, it was the largest gift made to any institution of higher education in American history. By today, the value of that gift has increased from that $105M to around ~$5B. So, basically, that -one- gift of stock, and the subsequent luck in the increase in value of the underlying stock, is what separated Emory from being "Emory" and Emory being largely irrelevant. It's well known that Emory wasn't added to the AAU until 1995, which was significantly later than almost all of the members, and the benefits of that gift is what placed Emory in the position to gain admission.

There is virtually nothing Emory could have done to compel Woodruff to make that gift or to ensure that the value of the stock increased once it received it. As a result, Emory is where it is because of a combination of circumstances that took place beyond its control and sheer luck.
Interesting. I remember reading somewhere that Tulane bylaws forbid them from holding donated stock. It had to be sold and converted into cash within a certain period of time. The reason I remember this is because Yahoo founder and Tulane grad David Filo donated $1 million of Yahoo stock in 1996 for Tulane to establish an endowed chair in the engineering department. I believe had Tulane held the stock it would be worth much more than than that today. Yahoo owns a big chunk of Alibaba stock which has turned out to be a great investment. Yahoo shareholders own it at $27 and BABA stock today trades around $142 a share.
In 2004, Filo and Netscape founder Jim Clark made matching $30 million endowments to Tulane University, with the $60 million going into an endowment used to fund $3 million in undergraduate merit-based scholarships per year but I'm not sure if it was stock or cash.
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Fri Jun 30, 2017 12:53 pm

Aberzombie1892 wrote:This was the result of the Great Recession due to all of the risky mortgages that lenders made and this deeply impacted virtually all universities. Even Harvard's endowment experienced a drop from $36.9B to $26B.

Tulane's endowment growth has been inline with private institutions since 1990, so, if Tulane was ever on the same level as the other high profile southern private schools, it fell behind sometime before that year.

http://harvardmagazine.com/2009/09/shar ... e-reported
zombie- I thought you might find this interesting as it pretty much supports your belief that the problem was started before 1990. Actually it was before 1980. Kelly took over in 1981 when the endowment was about $50 million. When he left it was at $406 million:

http://www.theadvocate.com/new_orleans/ ... ign=buffer
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Aberzombie1892
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Sat Jul 08, 2017 7:58 pm

Good stuff.

Let's see here - James B. Duke gave The Duke Endowment, an indenture of trust created to benefit Duke University and some other non-profits, $40M in 1924 and left it $67M in 1925, and those gifts would be worth about $1.3B today. The funds in the indenture of trust are invested (primarily) in Duke Power Company stock, and 20% of income of the stock purchased is reinvested, each trustee receives 0.2% of that income, and the remaining income is paid out at a certain percentage rate to particular non-profits - for example, Duke University is paid 32%. For the record, the Duke Power Company had over $23B in revenue in 2015 and over $5B in profit that same year, so, we are talking about a serious amount of money/value given how much was invested in 1924/1925.

http://dukeendowment.org/sites/default/ ... 6-2011.pdf

https://en.m.wikipedia.org/wiki/The_Duke_Endowment
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Mon Jul 10, 2017 9:11 am

So... This is where we are:
1. Duke University - endowment growth is tied to the The Duke Power Company.
2. Emory University - endowment growth is tied to the The Coca-Cola Company. The gift it received of stock in 1979 was the largest gift to a University in American history at the time.
3. Vanderbilt - endowment growth is complicated. Vanderbilt was founded with a $1M gift in 1873 and the university was largely supported by the Methodist Church until it separated from the church in 1914 (subsequently, the Methodist Church created SMU and expanded support for Emory). Vanderbilt was gifted $340M of Ingram Industries stock in 1998, which was the largest gift to a University in American history at the time.
4. WashU - endowment growth is also complicated in that the University had no backing of a religious organization, single wealthy patron, or earmarked government support - it was created by the business community. From 1983-1987, the University raised $630.5M, which was the largest amount raised in a fundraising campaign at a University in American history at the time. By 1995, it had a $1.72B endowment, and, between 1998 and 2004, it raised $1.55B.
5. Rice - endowment growth is also complicated. Rice was founded with $4.6M endowment in 1904, and, for many years, the endowment was primarily invested in real estate, notes, bonds, and a few blue chip stocks. In the early years, the Rice endowment often acted as a bank by loaning money to churches, clubs, and civic organizations in Houston. Valued at about $1 billion in 1989, the endowment is now valued at $5.3 billion (as of June 30, 2016), and is highly diversified across many asset classes, with both domestic and international exposure.

The long and short of it:
1. Tulane started with less than most of these universities.
2. Tulane's endowment is not tied to the growth of a particular company.
3. Tulane hasn't had a "biggest gift" or "biggest fundraising effort" at the national level in recent memory.
4. Tulane is located in a region that hasn't been home to significant economic growth (LA/AR/MS).
5. Tulane is not located in a state that historically has valued education and research.
6. Tulane is not in a close proximity (~3 hours) of either (1) a top 20 metropolitan area or (2) another major research institution. Note that Houston, St. Louis, and Atlanta are all top 20 metropolitan areas by population, Duke is located in the research triangle with UNC and NC State, and it is about 3 hours from Vanderbilt to Atlanta.
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