Wall Street Blues Hit Princeton, Too

Wall Street Blues Hit Princeton, Too

Princeton University is tightening its belt as its endowment takes a big hit because of the downturn in the markets.

Shirley M. Tilghman, Princeton’s president, disclosed Thursday that the university’s endowment, which was valued at $16.3 billion at the end of June 2008, had lost 11 percent of its value through the end of October.

But the loss is probably far worse than that. Half of the endowment’s investments are illiquid, meaning that they have yet to be marked to depressed market prices. Once the university reassesses all of its marks at the end of its fiscal year this summer, it could be looking at a 25 percent decline in its assets, the university said.

That would be a loss of just over $4 billion for the school.

Princeton is hardly alone in its troubles. It joins fellow Ivy Leaguers Harvard and Yale in disclosing big losses in their endowments, which, in Princeton’s case, finances half of its operating budget each year. Universities generally invest in a wide range of assets, including commodities, real estate and private equity funds.

Harvard may be in a worse position. In December, Harvard sent a letter to its deans saying that the university’s $36.9 billion endowment fund lost 22 percent of its value from July to October and could decline as much as 30 percent by the end of June 2009.

Yale’s endowment, previously worth $22.9 billion, was down 13.4 percent during the same time, and, similar to Princeton, Yale now anticipates a 25 percent drop in its assets when everything is tallied up this summer.

Princeton has announced several measures to try to cover the estimated $50 million hole that has opened up in next year’s operating budget because of the decline in the endowment. Tuition for student will rise 2.9 percent, and pay raises will be capped at $2,000 for tenured professors. It plans a series of capital project deferrals to reduce the cost of its future construction plans by more than $300 million.

The university said it was even evaluating telephone use in the dorms.

– Cyrus Sanati