In a year of budget cuts and recessions, Miami University is able to explore new opportunities for the use of its multi-million dollar endowment.
With private equity investments in marketplaces such as real estate, natural resources and a stake in the ownership of the John Hancock Building in Boston, the university has invested in the private marketplace just enough to where it was not completely detrimental to the health of Miami's lofty endowment, according to Bruce Guiot, director of investments and treasury services.
Guiot said Miami invests less than 20 percent of its $337 million dollar endowment in private equities to eventually make a return.
"Some of the Ivy League schools have 40 to 50 percent, ours is less then 20 percent," Guiot said.
This number is small enough to not substantially damage the university's endowments, as private equities did to some schools when the marketplace went sour last winter.
"Harvard had to sell bonds because they didn't have sufficient liquidity," Guiot said.
Guiot said when the market stopped functioning, many schools did not have adequate liquidity, or availability to turn investments into cash because of their large investments in the private marketplace.
David Creamer, vice president of finance and business services at Miami, said although these private equities had an impact on tuition hikes at other schools, private investments did not necessarily increase tuition at Miami.
"There's been no direct correlation in having private placement and changes in tuition," Creamer said.
Guiot said part of the problem with private investments is the longevity of the agreement.
"When you make a commitment, you're in until you get your money back, you can't get your money out," Guiot said.
This caused many problems, but Guiot said the impact was low for Miami.
Now the university is able to re-evaluate its place in the private investment realm.
For the 2009 year, Miami has halted any new commitments with private equity investments. They are still in the process of seeing returns from private investments made in early years, including 2008, according to Guiot.
"We are continuing to monitor that very closely," Guiot said. "We are being cautious about our cash flow. We are not making new commitments because we have sufficient outstanding commitments that have not been called yet."
Guiot said private investments at Miami explore a number of different areas.
"It's (private funds and ownership) are global, not just in the United States, we own part of the John Hancock Building in Boston," Guiot said. "We got it for cheap, actually."
Guiot said Miami also invests its private assets into natural resources.
"We have direct ownership in timberlands," Guiot said. "We also have investments in private companies that are engaged in generating power and storage of natural resources and transportation, exploration of gas and oil."
Creamer said although Miami is being cautious about new commitments, it would maintain the approximate 20 percent investment by private equities.
"We're not in a situation where we're foregoing these opportunities, they'll be evaluated," Creamer said.
Creamer also said Miami's investment committee and advisers would examine what areas are best to invest.
"There may be other vehicles that are more attractive then real estate and that's the process we go through," Creamer said. "There are different things that may be appropriate and we use our investment committees and advisers to evaluate those."
Creamer also credited the university's careful planning for the ability to continue investing in private assets.
"We probably did a better job for planning (than other institutions)," Creamer said. "We continue to be open to these opportunities, still so it's an appropriate place in our investment."
