The other day I sprinted all the way to a seat on the streetcar before discovering my backpack was unzipped. I was terribly relieved to find my sweater and book still inside.
Both have practically no value, but for at least thirty seconds or so, I felt really stupid.
Imagine how dumb I’d feel if, instead of a sweater, I’d lost $400 million? That must be about how Donald Lindsey feels now.
Three years ago, U of T wooed Lindsay, a big-name money manager, away from a U.S. university. With Lindsey as the CEO, U of T created a corporation called U of T Asset Management (UTAM) to manage its copious (around $4 billion) endowment and pension funds.
For the past couple of years, UTAM has had an “aggressive” investment strategy—putting as much as 80 per cent of the endowment fund into stocks. This is some heavy betting, and UTAM seems to be consistently losing—down $400 million in two years.
But this isn’t really an open-and-shut case of bad money management. It would be hard to place all the blame on Lindsey. The market’s been a bitch lately, and compared to some other universities (like Harvard), U of T has actually done comparatively well with its investments in recent years. In the long run, a widely invested endowment fund could turn into some serious cash when the market turns around.
What’s curious is the timing of this issue. The recent announcement in The Globe and Mail that Lindsey is leaving (and the coverage of the mammoth loss) comes at a critical time in the university’s budget cycle. Very soon U of T will begin deciding where to spend its money and whether to raise tuition.
Only 3.5 per cent of U of T’s operating budget comes from the endowment fund, but 3.5 per cent of $800 million is a lot of dough. A big loss in the endowment fund means inevitable and justifiable cutbacks in programs, hiring, and assistance for students. It also makes it much harder to argue for tuition freezes or putting more money into programs, hiring, student services, or financial aid.
Nobody wants to lose so much money, but it certainly is interesting how the timing of this scandal could actually work to the political advantage of the administration.
One thing is sure, while U of T is off finding another money manager to pay upwards of $300,000 a year, students are unlikely to see much improvement in the affordability or the quality of their education any time soon.
