Andy Katz: C7 "likely to bump to 10"; Georgetown influence could mean Richmond

[GGGG]

Simple vote by their BoD I would guess. Not all that difficult.

Probably not.  Most endowments are donor restricted and *by law* its earnings can only be used for the purpose for which it was donated.  Now, a large endowment can free up resources elsewhere, but likely that has already happened.  Again, it isn't a savings account.

[GGGG]

Let me give you an example.  If John Anderson donates $2 million to create "The John Anderson Professorship in Engineering," the annual earnings from that endowment are used to fund the salary.  Let's say its $100,000 (5%) for the sake of ease of math.  Now let's say that the University had a engineering professor on its books already for $100,000....what it can do is now reallocate that $100,000 already budgeted , and replace it with the endowment earnings.

So when you hear that "Richmond has a billion dollar endowment," all that means is that there are multitudes of these individual funds that add up to that amount.

Now, if some of these endowments are set aside for athletics...or basketball...those earnings may be used.  But that's another issue entirely.

And all of this is dictated by state law.

[keefe]

Probably not.  Most endowments are donor restricted and *by law* its earnings can only be used for the purpose for which it was donated.  Now, a large endowment can free up resources elsewhere, but likely that has already happened.  Again, it isn't a savings account.

Aren't most restricted funds set aside and separate from the Endowment (ie funding Chairs, scholarships, Cap Ex for PPE, etc...) The Endowment is often a slush fund for the BoD to address exigencies. But you make a key point, disbursements must be from upticks in valuation and not cannibalizing principal. When investment performance falls short of opex for a specific donation the BoD, in concert with the Donor Trustee, must address the shortfall in some way which is usually prescribed in the contract.  Endowment funds can be used to fund athletic programs, especially for PPE Cap Ex.

[Dawson Rental]

Probably not.  Most endowments are donor restricted and *by law* its earnings can only be used for the purpose for which it was donated.  Now, a large endowment can free up resources elsewhere, but likely that has already happened.  Again, it isn't a savings account.

Let me give you an example.  If John Anderson donates $2 million to create "The John Anderson Professorship in Engineering," the annual earnings from that endowment are used to fund the salary.  Let's say its $100,000 (5%) for the sake of ease of math.  Now let's say that the University had a engineering professor on its books already for $100,000....what it can do is now reallocate that $100,000 already budgeted , and replace it with the endowment earnings.

So when you hear that "Richmond has a billion dollar endowment," all that means is that there are multitudes of these individual funds that add up to that amount.

Now, if some of these endowments are set aside for athletics...or basketball...those earnings may be used.  But that's another issue entirely.

And all of this is dictated by state law.

Your arguments show more knowledge of endowments than I have.  I'm largely parroting a statement made by Aughnanure here.  Aughnanure was the one who brought up Richmond's sizable endowment earlier as a plus for their inclusion.  Hopefully, he reads this and can elaborate.

[GGGG]

Aren't most restricted funds set aside and separate from the Endowment (ie funding Chairs, scholarships, Cap Ex for PPE, etc...) The Endowment is often a slush fund for the BoD to address exigencies. But you make a key point, disbursements must be from upticks in valuation and not cannibalizing principal. When investment performance falls short of opex for a specific donation the BoD, in concert with the Donor Trustee, must address the shortfall in some way which is usually prescribed in the contract.  Endowment funds can be used to fund athletic programs, especially for PPE Cap Ex.

It's kind of complicated...and there have been recent changes in state law that do allow endowments to drop below the principal value.  But my point is that UR's Board of Directors can't just say, "Hey, let's join the C7 and tap into our endowment to fund our costs."
  

[keefe]

It's kind of complicated...and there have been recent changes in state law that do allow endowments to drop below the principal value.  But my point is that UR's Board of Directors can't just say, "Hey, let's join the C7 and tap into our endowment to fund our costs."
  

My experience was working with private equity players who were caretakers for trust funds. Two of our biggest clients were the Bronfman and Ziff trusts. Both funds had stipulations requiring X% to be invested in Asia. At GE Cap we brought in third parties for reasons of risk management, strategic expertise, or that it was cheaper to use their money than GE's. Our mandate from them was to bring them opportunities with horizons ranging from months to years and delivering x return (Their hurdle rates were double digit but that was very doable in Asia in the 90's.) In the case of the Bronfman money there were no restrictions other than geographic and jurisdictional distribution. As such they invested in Bentoel, an Indonesian Kretek cigarette company in which we were fronting for Philip Morris. The Ziff's had many toll gates around "Green" and "Morality" issues. They would therefore not invest in a cigarette enterprise, or alcohol, or companies that could not meet OHSA safety standards. The Bronfman's made their fortune during Prohibition and had few if any concerns about Green or Morality.

[Eight Legger]

That's right, they are separate endowments, essentially. I am not certain what our athletic/basketball money amounts to, but our basketball spending is somewhere in the $4M range annually. We are about to begin the main phase of a renovation of the Robins Center to modernize portions of it and reduce capacity a bit by adding in some suites. Right now it seats 9,000 and the estimates are that we'll decrease that to about 7,500 (which is what VCU seats) or 8,000.

We're paying Mooney somewhere in the $1.3M range annually and will be investing a total of about $15M in the Robins Center renovations. My understanding is that this phase will begin after the season and be completed in time for next season.

I'm sure that if we get the invite, there will be some type of assurance requested that we will bump up spending to X amount. I'll just say that our ability to meet that requirement is not high on my list of concerns. Despite our football success, our administration knows we are a basketball school and will do what it takes to position us in the best place possible.

[GGGG]

My experience was working with private equity players who were caretakers for trust funds. Two of our biggest clients were the Bronfman and Ziff trusts. Both funds had stipulations requiring X% to be invested in Asia. At GE Cap we brought in third parties for reasons of risk management, strategic expertise, or that it was cheaper to use their money than GE's. Our mandate from them was to bring them opportunities with horizons ranging from months to years and delivering x return (Their hurdle rates were double digit but that was very doable in Asia in the 90's.) In the case of the Bronfman money there were no restrictions other than geographic and jurisdictional distribution. As such they invested in Bentoel, an Indonesian Kretek cigarette company in which we were fronting for Philip Morris. The Ziff's had many toll gates around "Green" and "Morality" issues. They would therefore not invest in a cigarette enterprise, or alcohol, or companies that could not meet OHSA safety standards. The Bronfman's made their fortune during Prohibition and had few if any concerns about Green or Morality.

But see, trusts law and endowment law are different.  When you need something to help you sleep, you can read this...

http://www.uniformlaws.org/shared/docs/prudent%20mgt%20of%20institutional%20funds/upmifa_final_06.pdf

[keefe]

But see, trusts law and endowment law are different.  When you need something to help you sleep, you can read this...

http://www.uniformlaws.org/shared/docs/prudent%20mgt%20of%20institutional%20funds/upmifa_final_06.pdf

That's ok. I am on some powerful drugs right now that get me tits up in seconds!