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Five Takeaways from Treasury Symposium 2017

February 23, 2017  | by Commonfund

Asset Allocation | Industry Knowledge | Operating Assets

Treasury Symposium 2017 was held in New Orleans earlier this month.  285 senior financial officers from over 100 large universities participated in the strategic discussions.  Once again, the takeaways from the three-day Symposium were thought-provoking as well as cautionary for the higher education industry.

Here are a few highlights from those discussions:

  1. Demographics for future students have changed – The 50 year uptrend in enrollment growth has come to an end resulting in fewer students to fill recently enlarged campuses.   In recent years, an inflow of international students has helped offset the decrease of U.S. students; however, recent political changes may put this student base at risk.   Ultimately, some schools will move to more discounting to attract students, leading to a broader divergence between competitive and less competitive schools.
  2. Financial resources are a difference maker! – Those institutions that have the ability to maintain and grow financial resources are likely to thrive where those with limited resources may be challenged, and possibly lose independence.
  3. The Internal Bank is essential – The ability to manage operating assets and debt portfolios effectively (the Internal Bank) has always been important, now it’s essential.  Not only is this important for credit ratings, peer comparisons and operating budgets, this is also necessary to meet funding deficits for growing capital needs.
  4. A favorable interest rate environment is over – Managing operating portfolios in this rising rate environment is difficult and requires diversification (into non-fixed income), continuous oversight and risk management.  This issue is accentuated by the end of cheap borrowing rates as the net cost of capital is poised to dramatically increase.
  5. Industry contraction will happen – However, higher education is much different than the private sector.  News or rumors of a possible merger or restructure could “kill” an institution by diverting potential students and resources away to other institutions quickly.  Integrating programs and facilities is tricky at best, and the need for this capability will grow.

Educational institutions will need to manage resources more effectively going forward as the environment for students and capital is changing rapidly.  Those institutions that do this well are more likely to prosper, while those who don’t may face a very uncertain future.

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Information, opinions, or commentary concerning the financial markets, economic conditions, or other topical subject matter are prepared, written, or created prior to printing and do not reflect current, up-to-date, market or economic conditions. Commonfund disclaims any responsibility to update such information, opinions, or commentary. To the extent views presented forecast market activity, they may be based on many factors in addition to those explicitly stated in this material. Forecasts of experts inevitably differ. Views attributed to third parties are presented to demonstrate the existence of points of view, not as a basis for recommendations or as investment advice. Managers who may or may not subscribe to the views expressed in this material make investment decisions for funds maintained by Commonfund or its affiliates. The views presented in this material may not be relied upon as an indication of trading intent on behalf of any Commonfund fund, or of any Commonfund manager. Market and investment views of third parties presented in this material do not necessarily reflect the views of Commonfund and Commonfund disclaims any responsibility to present its views on the subjects covered in statements by third parties. Statements concerning Commonfund’s views of possible future outcomes in any investment asset class or market, or of possible future economic developments, are not intended, and should not be construed, as forecasts or predictions of the future investment performance of any Commonfund fund. Such statements are also not intended as recommendations by any Commonfund entity or employee to the recipient of the presentation. It is Commonfund’s policy that investment recommendations to its clients must be based on the investment objectives and risk tolerances of each individual client. All market outlook and similar statements are based upon information reasonably available as of the date of this presentation (unless an earlier date is stated with regard to particular information), and reasonably believed to be accurate by Commonfund. Commonfund disclaims any responsibility to provide the recipient of this presentation with updated or corrected information. Past performance is not indicative of future results. For more information please refer to Important Disclosures.

Disclaimer

Information, opinions, or commentary concerning the financial markets, economic conditions, or other topical subject matter are prepared, written, or created prior to printing and do not reflect current, up-to-date, market or economic conditions. Commonfund disclaims any responsibility to update such information, opinions, or commentary. To the extent views presented forecast market activity, they may be based on many factors in addition to those explicitly stated in this material. Forecasts of experts inevitably differ. Views attributed to third parties are presented to demonstrate the existence of points of view, not as a basis for recommendations or as investment advice. Managers who may or may not subscribe to the views expressed in this material make investment decisions for funds maintained by Commonfund or its affiliates. The views presented in this material may not be relied upon as an indication of trading intent on behalf of any Commonfund fund, or of any Commonfund manager. Market and investment views of third parties presented in this material do not necessarily reflect the views of Commonfund and Commonfund disclaims any responsibility to present its views on the subjects covered in statements by third parties. Statements concerning Commonfund’s views of possible future outcomes in any investment asset class or market, or of possible future economic developments, are not intended, and should not be construed, as forecasts or predictions of the future investment performance of any Commonfund fund. Such statements are also not intended as recommendations by any Commonfund entity or employee to the recipient of the presentation. It is Commonfund’s policy that investment recommendations to its clients must be based on the investment objectives and risk tolerances of each individual client. All market outlook and similar statements are based upon information reasonably available as of the date of this presentation (unless an earlier date is stated with regard to particular information), and reasonably believed to be accurate by Commonfund. Commonfund disclaims any responsibility to provide the recipient of this presentation with updated or corrected information. Past performance is not indicative of future results. For more information please refer to Important Disclosures.