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September 29, 2008
Emory financial team monitors economic climate

By Nancy Seideman

As President Jim Wagner noted in his State of the University address, Emory’s financial team is working to ensure that the University’s economic condition remains as strong as possible.

Chief Investment Officer Mary Cahill was in New York early this week to meet with investment managers, traders and other financial consultants to assess the current market situation and long-term implications for the University.

“We want to be on the scene in-person to talk with financial leaders and receive the most up-to-date information on the market,” said Cahill. “I think political and financial oversight leaders are acting quickly to try to get the nation’s economy back on track. And at Emory we’re staying the course in our long-term investment management, albeit making some changes around the edges to reduce risk.”

The current volatility of the market is having an immediate impact not only on the University’s investment portfolio, but also on the debt side, specifically in the variable bond market, which has experienced an extraordinary spike in interest rates affecting the amount of interest Emory pays for its debt. That, coupled with the decline in equities, will have an impact on how much new debt Emory can take on to fund construction expenses.

In the short-term, according to Executive Vice President for Finance and Administration Mike Mandl, the University can expect that:

• Deterioration in the investment and bond markets will likely push back the timing on several campus projects that are in various stages of design, but will not slow projects that are already under construction.

• Emory’s endowment will have a decline for fiscal year 2008, which ended Aug. 31. This is due to the national downturn in the investment market, with negative returns not producing asset growth to cover annual spending from the endowment. Emory Report will provide full coverage of the University’s endowment picture for the short and long term when the annual endowment survey published by the National Association of College and University Business Officers is released in mid-November.

• At the same time, short-term interest rates on Emory’s operating cash investments are at historic lows, reducing the amount of income that supports the operating budget of the University.

“This confluence of external economic conditions makes it all the more important for investment and philanthropic support from our partners, friends and alumni to maintain Emory’s excellence,” said Mandl. “Along with success in Campaign Emory, we will continue to align our limited resources to ensure we attract and retain the very best faculty, students and staff to maintain Emory’s trajectory.

“It is important to keep in mind that the climate we are weathering is shared generally throughout the country in most not-for-profit as well as corporate sectors, and certainly for most of higher education. Confronting the economic realities from a position of relative strength is still an advantageous place to be.”