Don’t lose sight of the GP’s motivation to increase assets under management (paying a 1.5% – 2% management fee), the benefits of which are typically enjoyed by a static group of individuals. As such, it is not inconceivable that a GP may commit fund capital to support an underperforming investment to avoid taking a write down during a fundraising effort.

Verses the idea that dumping the least liquid assets in a brutal bear market is a great idea.

The only obvious thing is that the valuations of PE are very optimistic.

Also, I have a feeling that the smaller guys will do worse then the larger ones. The exception being the real Luddite foundations and pension funds that just bought stocks and bonds.

One other perspective is that the large private university endowments are probably closer to $200 billion and declining. Yea, it is a big chunk of alternative investments, PE, etc. CALPERS used to be over $200B.

I would hate to be one of the big schools begging for more money these days. HYP can coast forever on their reps, but a school trying to claw its way up the UNWR rankings by emulating the big dogs are going to see some major damage.

I work in academia. The only alternative is the football program. You pick.

Swensen is Yale’s Chief Investment Officer. The first version of the book was published in 2000. This version was originally slated for released in Oct, but has been pushed back to Jan.

Whenever anyone would question the possible need for cash for capital calls, they’d be told “don’t worry, you can use the cash flows that you’ll be receiving from our earlier deals to meet the new capital calls”. Obviously, there aren’t many cashouts going on these days and it doesn’t look like there will be for a while.

But it gets worse, most of these large endowments have “spending policies” which call for something like “five percent of the trailing twelve quarter average endowment balance”. This had been done to smooth out volatile years. But now, with many values down 40%, this equates to something like 7% of what’s left. There was an article in the NY Times last week which indicated that U VA had only 21% of their assets liquid. So, if they need to spend ~7% out, and have a bunch of capital calls pending, they could also be at risk. Incidentally, the former head of their investment company went out on her own a couple of years ago and set up a company to many funds for smaller colleges and universities. I wonder if they’ve got similar problems?

I suspect the PE firms are leveraged to the hilt, just like every other financial operation being operated by the geniuses brewed up by our so called institutions of higher learning in the last 15 years.

Why wouldn’t the simple explanation be that investors are panicing to get out as asset values return(crash) to earth. Maybe the best thing is for the Harvard endowment to become 10B instead of 36.7B.

Probably not. Just remember: What goes around, comes around.