Higher education institutions across the nation, including Carleton College, have money invested in Commonfund’s floundering “Short Term Fund.”
But so far, Carleton administrators said they are far from panicked.
“Recent developments in the financial markets have caused for many of us confusion and uncertainty,” Carleton President Robert A. Oden Jr. wrote of the matter in a message to the college community last week. “While there is much that is changing each hour in the national and international spheres, I want to take a moment now to reassure you of the situation at Carleton.”
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Commonfund, based in Connecticut, is the largest nonprofit investment manager, according to its Web site.
Saint Olaf, Northfield’s other private college, does not have any money invested in the Commonfund, according to Steve Blodgett, director of marketing and communications.
“St. Olaf has not experienced, and does not anticipate any problems, with the college’s cash flow situation,” Blodgett said on Tuesday. “Those immediate funds are diversified and well protected accordingly.”
President Oden wrote his message to the community partly in response to an article written in the Star Tribune on Wednesday, Oct. 1. That article indicated college administrators were nervous their Short Term Fund investments would become inaccessible and cause the schools to not be able to payroll.
“Contrary to some Twin Cities-based media reports earlier this week concerning private colleges in Minnesota,” Oden wrote, “Carleton and other schools with whom we are in contact are not compromised in our ability to meet our basic financial obligations.”
Oden went on, “The recent acquisition of Wachovia Bank by Citigroup has had some implications for an organization called the Commonfund that Carleton and many other colleges and universities use as a cash manager. Citigroup notified Carleton on Tuesday that Wachovia had resigned as trustee of the Commonfund Short Term Fund in conjunction with its acquisition. The Short Term Fund is being wound down, and the Commonfund placed temporary restrictions on withdrawals to allow an orderly liquidation. The Commonfund Intermediate Term Fund also instituted temporary withdrawal restrictions.”
As a result, Oden said, “Carleton has withdrawn amounts made available by the Commonfund and will continue to do so as funds become available.”
He said the restrictions should not affect the college’s operations.
Oden concluded his message saying, “Our Treasurer’s Office is in contact with the Commonfund and our primary banks, JP Morgan Chase and Wells Fargo, and we expect to continue to work through these issues.”
Carleton’s endowment portfolio finished September at approximately $590 million, declining about 8 percent since the end of June. The portfolio, Oden said, benefits from diversification across many investments and is holding up well during this “particularly painful period in the financial markets.”
As for St. Olaf’s response to this “painful period,” Blodgett said “The downturn in the national economy is affecting St. Olaf as you would expect, with diminished returns on investments made in the endowment portfolio and ups and downs on variable interest bonds for past construction project, excluding Regents Hall.”