What is this 600 million dollar chunk of cash?
what is the endowment?
the endowment is a magical black hole of imaginary creatures and mystical beings, namely hedge funds, private equity, real assets and other investments (as opposed to unkept monayz, public $$, fake assets and nonother investments).
The "endowment" is actually just the total value of Oberlin's investments.
percentage breakdown of the endowment:
(all photos & info from the fy2010 oberlin financial report. THis report, as well as financial reports back to 1995 can be found at http://new.oberlin.edu/office/controller/reports/2010.dot)
the endowment is relatively simple to understand. It has three main sections: fixed income, total equity and alternative investments.
fixed income is a set amount coming in each cycle.
equity is the dividend income oberlin makes off its stocks/traditional investments.
alternative investments are non-traditional investments (traditional investments: cash, stock, bonds, property). non-traditional investments include hedge funds, wine, your grandmother's stamp collection and "real assets." (what's that? definition -->)
the endowment can also be broken down by its "liquidity," or the degree to which an asset or security can be bought or sold in the market without affecting the asset's price. so extremely liquid assets can be sold in a day without losing value and some assets are essential illiquid, or state of a security or other asset that cannot easily be sold or exchanged for cash without a substantial loss in value.
the endowment is not stable, either. the endowment fluctuates, grows, diminishes. IT'Z ALIVE, Y'ALL!
the college defines each term in the following manner. I will translate each in italics.
fixed income: fixed income investments include investments in government securities and corporate bonds via separate accounts, limited partnerships and co-mingled vehicles.
us equity, international equity, emerging markets equity: the college invests in public equity securities in various geographical areas including us, developed markets (international equity) and emerging markets. public equity securities are owned either directly by the college or indirectly through investments in limited partnerships and co-mingled vehicles which invest primarily in public equity securities.
hedge funds: hedge funds seek to generate high long-term real returns and reduce volatility by exploiting market inefficiencies. returns are achieved using various strategies including market neutral, long/short equity, credit, event driven and global macro strategies.
private equity: investments include venture capital, buyouts and distressed debt. the college diversifies these investments by geographical and sectors.
real assets: include real estate, energy, commodities, treasury inflation-protected securities (TIPS) and real estate investment trusts (REITs). real asset investments are made both via liquid public markets (TIPS, REITs, natural resource equities and commodities) and via illiquid private equity structured funds (private real estate and, private energy).
cash and cash equivalents: the college invests cash and cash equivalents, equities and other securities with quoted prices in active markets.
funds held in trust by others: investments represent resources neither in the possession nor under the control of the college, but rather held and administered by outside trustees, with the college paid income or a residual interest from the assets of such funds. the fair value of these funds is based on inputs that are derived principally from observable market data which is used to estimate the future cash flows of the trust.
gift annuities and trusts and investments restricted for plant facilities: these investments consist of annuity and life income funds and assets restricted to investment in land, buildings and equipment. the college invests in equities and fixed income securities with quoted prices in active markets.
interest rate swaps: the fair value of the interest rate swaps is based on projected london interbank offered rate (LIBOR)for the duration of the swap, values that, while observable in the market, are subject to adjustment due to pricing considerations for the specific instrument and the resulting fair values.