They Can't All Be Harvard or Yale - Universities Forced to Sell Alternative Investments

Just like everything else.

From the New York Times:

Some of the nation’s universities are trying to sell chunks of their portfolios privately as their endowments swoon with the markets.

Among institutional investors, school endowments aggressively embraced private equity, real estate partnerships, venture capital, commodities, hedge funds and other so-called alternative investments over the last few years. Endowments with more than $1 billion in assets reported 35 percent of their holdings in these types of investments on average last year, a much greater portion than big public pension funds, for example.

Last year, the average seller got $1.04 for every dollar of face value, according to a report by Cogent Partners, an investment bank for institutions looking to sell such holdings in the secondary market. Since June, sellers have been getting 50 cents or less on the dollar, said Colin S. McGrady, a managing director at Cogent.

I love markets (though admittedly, I have not been so much in love with markets over the past few weeks). The psychology of herds as manifested in financial markets fascinates me.

Over the past several years, the herd had been stampeding into alternative assets as institutions all tried to emulate Harvard and Yale, which put up some gaudy numbers when markets were getting creamed.

Now, unsurprisingly, after pouring an ocean of liquidity into alternatives, which led to many really stupid deals, pieces are being sold off at 50 cents on the dollar.

We all can't be Harvard and Yale.

The cycle of greed and fear never ends.

Comments

[Octogenarian:]

no doubt, the HYP, Standford and MIT are all hurting. Most of them had insituted free tuition for middle class kids who got in. That's going to hurt these elite U's more.

2008 Nov 28 11:01 AM

[joes:]

One good outcome will be the unraveling of the last bastion of royalty in America, the college system.

Just like the royalty of europe the failure of the banking system created and run almost entirely by third generation Ivy Leaguers will expose the phony values in those schools.

The "middle class" kids that they are educating for free may help to restore the reputation somewhat, but that will be to little too late as people start to understand how little value these group think sessions are really worth in what is coming next.

I have 2 years of college and work and have been asked to help a small company regain profitability, that means spending my days with the six seniors officers all with top 10 MBA's who combined have made less money than I.

I wake up everyday thankful that I was poor and could not get into the system, I could have been one of these sorry bastards.

2008 Nov 28 11:50 AM