Wednesday, December 17, 2008

Duke’s endowment, budget reporting trails Harvard’s & Yale’s

I’m a Duke alum so I like to see Duke excel.

But when it comes to timely, detailed reporting of the financial downturn’s effects on endowments and budgeting, Duke’s reporting lags that of Harvard's and Yale's.

Just 2 days ago Yale President Richard C. Levin released a lengthy Budget Letter

Following release of his letter, Levin participated in a Q&A with the Yale Daily News. (see here)

On Dec. 2 Harvard President Drew G. Galpin released a Financial Update, one of a number of recent letters she's released and interviews she's granted in which she's sought to keep the Harvard community informed as to the current value of Harvard's endowment and specific budgeting plans for the university.

It was back on Oct. 23 that Duke President Richard H. Brodhead released his most recent letter on "Duke and the economy." On Dec. 8 Brodhead and BOT chair Robert Steel granted an interview to The Chronicle. Judging by what The Chronicle published, their goal was to simply reassure the Duke community that everything's being well-managed. (Chronicle story here)

Brodhead's letter contains a good deal of back-patting and failed to inform regarding the then current value of Duke's endowment.

Here's a representative excerpt from Brodhead's letter :

Duke’s endowment has been one of the most successful among all U.S. universities. For the fiscal year ending June 30, 2008, the endowment recorded a 6.2 percent increase in market value – this at a time when many comparable funds actually declined in value.

Indeed, though the past few months’ results have not been positive, over the past ten years the Duke University endowment has grown at an average annual rate of 15.6 percent, which places it among the top performers of all university endowments.
President Brodhead and the trustees owe the Duke community a current, detailed explanation of the value of the endowment and of current budget planning, particularly as regards student aid, salary and benefits, and major projects currently in the planning stage.

Hat tips: a number of you who are sending on links and info


Anonymous said...

God forbid Brodhead, Steel and the trustees do for the endowment what they did with the Duke lacrosse case.

Anonymous said...

According to Duke's 2008 financial report, its endowment was $ 6.1 billion as of 6/30/08; Duke's balance sheet included an additional $ 2.4 billion in investment assets ( including $ 1.4 billion for DUHS). In addition, Duke had $ 1.3 billion of assets in its defined benefit pension plan as of 6/30/08. All these assets ( $ 9.8 billion ) are managed by DUMAC and are invested similarly. Therefore the impact of investment losses on Duke's operating results will be much more significant than the losses on Duke's endowment.

Duke's " aggressive " investment strategy appears to be consistent with Yale's / Harvard's. Therefore , investment results should be similar , i.e. 25 to 30 % losses since 6/30/08. Assuming no additional losses from now until 6/30/09 ( which may not be a good assumption ), Duke could expect a $ 2.5 billion to $ 3 billion " hit " to its fiscal 2009 financial results .

The financial crisis will also likely result in less philanthropic contributions to Duke from The Duke Endowment (also managed by Dumac ), alumni, parents , foundations, corporations etc.

I expect that peer pressure and inquiries from alumni will prompt Duke to issue a news release sooner rather than later. I also expect that the release will " understate " the impact of the financial crisis and the related investment losses.


Anonymous said...

Dollars to donuts Duke has lost the same percentage amount as Harvard and Yale, possibly more. University endowments make piles and piles in good years, and they lose and lose in bad years. How about some transparency, Duke? Shameful and shabby behavior, treating alums as gullible fools. JOHN

No justice, no peace said...

The fact that these men have intentionally mislead everyone regarding the most recent reporting period should make any involved very, very nervous.

Anonymous said...

Brodhead sent out a letter today on this very topic. Ask someone who works at Duke to see their copy. I only looked at mine cursorly but I think the endowment loss was less than 30%.

Anonymous said...

Brodhead's e-mail is more of the same from Brodhead and Steel, the BS team.

Anonymous said...

"As of early December, the market value of the endowment was approximately 19% lower than it was on July 1. This is a serious concern, but the news could be worse. First, Duke's investments have been skillfully managed. Over the past ten years, only one university endowment has outperformed Duke's, and the decline we have experienced this fall has not been as sharp as many of our peers have reported. Second, it is important to remember that spending from the endowment has historically made up about 15% of the University's annual operating budget - again, a lower proportion than many of our peer institutions. And finally, the impact of this decline on our activities will be tempered by our spending policy, which calls for paying out 5.5% of the average value of the endowment over a three-year period."