In 2003, Case Western Reserve University’s new president, Edward Hundert, introduced an ambitious three-year Vision Investment Plan that he hoped would transform the Cleveland-based institution into what he called “the most powerful learning environment in the world,” tapping into its cash reserves and leveraging the strength of its endowment fund. But by the next year annual losses became the order of the day when philanthropic support and research funding did not meet revenue expectations at Ohio’s largest private research university.

By 2006, after receiving a vote of no-confidence from the arts and sciences faculty, Hundert resigned. In July of the following year, newly appointed president Barbara Snyder arrived on campus to take on the $20 million annual deficit. That October the board of trustees adopted a fiscal austerity plan designed to bring the school back into the black. With the help of tuition and enrollment increases and a few medical school grants, Snyder managed to balance the budget just in time for the close of the academic year on June 30, 2008. Then disaster struck.

In the summer of 2008, the financial markets began their nine months’ long downward spiral, punctuated by the September bankruptcy filing of investment bank Lehman Brothers Holdings and the government bailouts of mortgage giants Fannie Mae and Freddie Mac. Case Western Reserve’s endowment fund fell in tandem, losing 19 percent of its market value. The endowment, which provides 10 percent of the school’s operating budget, was seen as a key element of the fiscal recovery plan. With time running out for the red-ink-­soaked medical, engineering and management school budgets, endowment CIO Sally Staley and her investment team were under pressure to turn those losses around. ....

Read More: university endowment · risk management · financial crisis