endowments

Liese Klein, a reporter for CTInsider, interviews MPI CEO Michael Markov and Tim Yates, President and CEO of Commonfund Asset Management, to gain insight into the implications of Yale’s potential sale of “a major chunk of its private equity holdings.” While some may view the move as a routine rebalancing, the article highlights liquidity issues within the endowment portfolio, as revealed by MPI research.

“Political pressure is only part of a “perfect storm” currently impacting major private equity investors like Ivy League universities, said Michael Markov, CEO of quantitative analysis firm Markov Processes International. The company researches financial data on major university endowments to identify trends as part of its analysis of institutional investor strategy. Private equity returns have been down since 2022 as deals have lagged, with profits down to one-third of their former levels in some cases. Trump’s actions are adding to a liquidity squeeze as universities seek to continue operating… They needed a push from the White House to realize that they’re sitting on a time bomb,” Markov said. ” Click here to read full article.

The cover article of Institutional Investor, “Yale’s Potential PE Sale Won’t Solve Liquidity Challenges,” provides an analysis of the school’s rationale behind its $6 billion sale in the secondaries market. James Comtois offers a detailed account of financial challenges facing the endowment, using MPI endowment liquidity analysis framework and quoting MPI CEO.

Barron’s magazine cover story Harvard and Other Universities Face an ‘Existential Threat.’ Inside Trump’s War on Endowments offers a deep dive into the financial conundrum facing elite universities—and heavily cites MPI’s data and research Elite U.S. Endowments: Government Funding and Liquidity Pressure. “Yet squeezing more from endowments isn’t simply a matter of flipping a switch. Markov’s analysis suggests that universities such as Brown, Harvard, Yale, and Princeton—in part due to their high exposure to private equity—are already constrained to generate more liquidity,” write Barron’s Abby Schultz and Andy Serwer, echoing MPI’s assertion that poor endowment liquidity is a deliberate feature of the “Yale model” pioneered by the legendary David Swensen. They argue that government pressure comes at the worst possible time for these elite institutions.

Bloomberg’s John Authers “Points of Return” column past week titled Trade War: Victory Over Inflation Now Seems So Yesterday features a comprehensive analysis of challenges facing elite universities in light of potential suspension of federal funding based on MPI research Elite U.S. Endowments: Government Funding and Liquidity Pressure. “What’s preventing these elite schools from calling the president’s bluff? One reason is that their massive endowments are illiquid. Schools face differing financial strain depending on their reliance on government support. Markov Processes International’s analysis shows that about 37% of the biggest US endowments’ assets are in private equity, which is generally illiquid… MPI’s Michael Markov warns that they could thus be forced to sell PE holdings on the secondary market at a discount. The current market turmoil is pushing investors to weigh whether a discount might make sense for them,” writes Richard Abbey, citing MPI data and figures.

In his FundFire article, Sabiq Shahidullah draws on MPI’s quantitative analysis, “Solving the Biggest Puzzle of the 2024 Endowment Season,“ to provide transparency into Michigan State’s top-performing endowment, given the limited information from the school’s public disclosures and a CIO interview. He quotes MPI’s analysis and uses its findings throughout the piece:  “A defining feature of MSU’s portfolio is its focus on tech stocks, which was the primary driver of returns, said Michael Markov, co-founder and chairman of Markov Processes. The endowment’s tech exposure comes not only through direct equity holdings, but also tech-focused hedge fund strategies and private equity and venture capital funds. MSU and Brown University share a similar tech-forward portfolio strategy, although MSU has an even stronger tech bias, Markov added.” (FundFire subscription required)

Risk.net’s Luke Clancy steps into the role of a due diligence analyst, drawing on insights from MPI’s research Solving the Biggest Puzzle of the 2024 Endowment Season to interview Phil Zecher, the star CIO behind the top-performing Michigan State University (MSU) endowment. He writes:

“The composition of the equity portfolio – which Zecher keeps closely guarded – is the subject of intense speculation. Quantitative analytics firm Markov Processes International (MPI) claims to have reverse-engineered the source of MSU’s returns from 14 annual published returns. It says the most striking factor is MSU’s significant exposure to technology stocks, the highest amongst peer endowments.”

Read the entire Risk.net story here (subscription required).

“Universities with large allocations to private markets are borrowing in the bond market to address funding issues, as private equity capital calls can compete with research funding for liquidity,” says Matt Toledo of the CIO magazine in his story discussing challenges facing elite universities in light of potential and real cuts in federal research grants.

The article draws extensively on MPI’s research into endowment liquidity, including insights from the MPI Transparency Lab.

Using quantitative analysis and MPI Stylus Pro to determine how Michigan State managed to outperform just about everyone

Bloomberg News’ Opinion Column Points of Return by John Authers & Richard Annerquaye Abbey covered MPI’s annual 2024 fiscal year Ivy Endowment Review. It focuses on “For this year, Harvard, the nation’s largest endowment, which has had a tough run, made a 9.6% return, finishing third behind Columbia and Brown. Harvard’s outperformance coincides with raised exposure to public tech stocks, both via equity fund managers and hedge funds. As MPI points out, endowment managers who pivoted toward tech stocks have reason to be particularly grateful at a time when alumni donations have been trimmed in response to the fraught climate on campus.”

Ivy endowment Fiscal 2024 in review: risks; VC; long-term vs recent years; prospects of Yale Model.