Friday, November 28, 2008
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.
Now they are balking. The value of some of these investments has fallen, and they are not easily shed because there is no public market for them, as there is for stocks. Worse, private equity and venture capital funds require investors to put up additional capital over time. Cash may now be in short supply at schools facing budget pressures and investment losses.
Special thanks to Joel Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.