With its value plunging along with the rest of the market, Harvard's endowment is laying off a full 25% of its staff -- 50 people.

Harvard's endowment has an unusually large staff because, unlike most colleges, it manages a significant portion of its money in-house. At most colleges, the endowment managers main task is to select outside managers for the funds.

Harvard's endowment managers have come under some fire lately for the seven-figure pay packages they often receive. According to The Wall Street Journal (subscription required), "For the most-recent academic year, HMC paid its top six managers $26.8 million."

By laying off a quarter of its staff to reflect a decline of around 25% -- probably a bit more -- in the endowment's value. Harvard is preventing its costs from growing to a higher percentage of its asset value. Lower bonuses for fund managers will also help the endowment control its costs.

Harvard endowment lays off workers originally appeared on BloggingStocks on Sun, 08 Feb 2009 08:40:00 EST. Please see our terms for use of feeds.

University endowments and pension funds for government employees and teachers are big investors in venture capital partnerships. Now, thanks to the decline in the stock market, these endowments and pension funds have too big a proportion of their portfolios invested in illiquid venture capital and private equity funds. So they are trying to sell those interests -- and I am guessing they will fail to do so or take big losses when they do.

Two of the biggest funds are above their limits. Consider the largest university endowment -- Harvard Management Company -- which had $36.9 billion as of June 30. Harvard has reportedly hired a bank to sell its private equity investments that make up 13% of its portfolio for fiscal year 2009. The largest state pension fund, Calpers, has a 10% target for private equity -- which includes venture capital and LBOs -- and because of falling stock values, its private equity share exceeds the target by 3%.

The forced sale of these private company ownership stakes is not good for the venture capital industry, which saw investment fall 6.9% in the third quarter. There might be some demand for the illiquid shares of venture-backed startups from corporate venture capitalists. But with an initial public offering market in hibernation and VCs telling their portfolio companies to cut way down on their burn rates, it looks like this largely lost decade for IT innovation will end with a nuclear winter.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter.

Plunging markets to hurt endowments, pensions, venture capital originally appeared on BloggingStocks on Mon, 27 Oct 2008 11:58:00 EST. Please see our terms for use of feeds.

We've all read about how expensive college educations can be. Hopefully, you're stashing away your hard-earned bread to be able to send Timmy to Princeton. Don't worry if you can't -- endowments and scholarships are picking up the slack.

But, for those on the upwardly-mobile track and thinking of sending your kids to an elite high school, get ready for some sticker shock.

The NYTimes.com reports today about growing tuition rates and endowments at some of the nation's leading prep schools.

While schools such as Exeter charge almost $40,000 for tuition, room, and board according to the article, that's just a fraction of the average of $63,500 annually Exeter fronts to house and educate each of its 1,000 students.

So, what's an aspiring family without the requisite resources to do?

Continue reading And you thought college was expensive?

And you thought college was expensive? originally appeared on BloggingStocks on Sat, 26 Jan 2008 18:10:00 EST. Please see our terms for use of feeds.

Continue reading Cut your volatility with timber

Cut your volatility with timber originally appeared on BloggingStocks on Mon, 21 Jan 2008 15:20:00 EST. Please see our terms for use of feeds.

Harvard's endowment takes a $350M hedge-fund hit originally appeared on BloggingStocks on Wed, 01 Aug 2007 15:35:00 EST. Please see our terms for use of feeds.

In the past, I've written about how hiring a pro to manage your money is unlikely to lead to superior returns, even if he or she has stellar Ivy League credentials. Nevertheless, investors may be able to learn some things from the new manager of Harvard University's $30 billion endowment. The New York Times recently interviewed Mohamed El-Erian, who took over the post last year. Here are some of the ideas that I culled from reading about his strategies:

* Be aggressive and willing to go against popular sentiment. In mid-January, only months after taking over, El-Erian made a large bet that the global financial markets were over-valued. It's a decision that's paid off so far, but it took some courage: he was the new man on the job, and he wasn't afraid to stick his neck out and make a bold call.

* While his predecessor, Jack Meyer, was unwilling to make bets on the direction of the market, El-Erian believes that he can do so with success. While this view in contradicted by many market pundits, El-Erian has confidence in his abilities, and is giving it a shot and, so far succeeding.

* El-Erian described his father's, a law professor, insistence that "we be exposed every day to a range of international newspapers that covered the entire political spectrum because it was a constant reminder that there are many ways to think about the same issue." Looking at issues from different perspectives, and seeing things differently from others, is an important part of successful investing. In fact, it's the only way to find strong stocks.

Michael Steinhardt, one of the most successful investors in recent times, called this variant perception: "a well-founded view that is meaningfully different from the market consensus . . . In those instances where there was no variant perception . . . I generally had no interest and would discourage investing."

The main thing to remember is this: to have an edge in investing, you need to see or understand something that others don't.

The secrets of Harvard's money manager originally appeared on BloggingStocks on Thu, 15 Mar 2007 13:37:00 EST. Please see our terms for use of feeds.