Credit-ratings agency Moody’s thinks Yeshiva, a private Jewish university located in New York City, will be broke by next year.
Yeshiva lost an estimated $US105 million losses with convicted Ponzi schemer Bernie Madoff, who was also a trustee, but that’s not why the university is running out of money.
According to an extensive two-year investigation by TakePart’s Steven Weiss and The Jewish Channel, the administration blew the school’s financial future on bad hedge fund investments over the last decade.
At one point before the 2008 financial crisis, the university became allocated 65% in hedge funds, which was the third-highest of any university endowment, the report said.
…The school lost more than $US500 million on its high-risk investment portfolio — after selling off nearly $US500 million of ultrasafe U.S. Treasury bonds when the new regime took over a decade ago, plowing the proceeds mostly into hedge funds and corporate stocks. Assuming the strategy of increasing risk in its investment portfolio would pay off with higher returns, the new president and the board that hired him took on a bevy of new expenses, spending down their cash reserves and resting much of Yeshiva’s fate on their hedge fund gambles. Now that those investments have proved to be losses, Yeshiva faces more than $US550 million of debt, and it appears to have been tapping into the principal of its investment portfolio to cover annual deficits. On their own, any one of these changes — the half-billion-dollar hit to its portfolio, the diminution of liquidity, and the mass of debt — would be a significant, though bearable, difficulty for a university; together, their effect has been devastating.
The investigation is long, but worth the read. You can read the full TakePart article here »
You can also play with the pie chart infographics to see how the university’s investment strategy shifted.