YALE UNIVERSITY INVESTMENTS Case Study Solution
Central problem
The central problem being faced by the university is how to manage the funds due to several problems in the economy. The university is confused as to whether it should manage the funds as equity investments or invest the funds somewhere else so that the investments should get a return and should be liquid enough to be used at the time of difficulty or when required by the university.
The university encourages its own previous students to be recruited at senior posts and people from outside are also welcome in order to manage the funds effectively as several experts outside the university were outsourcing the task of managing the portfolio investments of the university.The university is performing well if compared to the other universities in the country. From 1985,Swenson was the responsible person who was looking after the fund management problem of the university and he believed thatit is not better to follow the crowd rather the university should have its own new plan for managing funds.He implemented several plans which later proved to be successful.
Key player and company’s decision making process
The key stakeholders of the university are the Chief Investment Officer David Swensen and Dean Takashi. They have the task of managing the funds of the company. The university made several fund decisions and tried several ways.It even hired external advisers for fund management but was not satisfied with their work. The university was trying to manage the equity funds with other sources of funds and anticipated the annual inflation rate.There was recession in the economy of the USA and the university had those funds so that it could manage its operations in the recession time period and then as the university was managing its funds in several areas of the world it had hired seven fund managers 1 fund manager for Europe and 6 for other parts of the world.The performance of the university in several parts of the world was good as compared to other universities in the world.However,it was finding it difficult to manage the funds in the financial markets and at the time of recession it was experiencing difficulties to manage its operations in the market. The university believed in three principles which should be followed in order to make the investment decision. The first principle is to use equity which is public equity or private equity. The second principle is that the university should have some diversification and the third decision making principle is that the university should seek some opportunities in less efficient markets and catch those opportunities to make its funds earn a high return than other universities.
Yale University Investments Office Harvard Case Solution & Analysis
Mission statement of the Organization:
The university’s mission is to contribute to the society by educating people through quality education. The university can only provide quality education if it has funds and if the funds are not managed effectively then it might be difficult for the university to continue its operations or make its operations better than they are currently. As the country is experiencing inflation or the economy is in recession so the fund manager will help the university to carry out its operations smoothly without any interruption or any adverse impact from the external environment. (Kolowich, 2017)
Core problems VS Ancillary problems:
The core problem of the university is that it is finding it difficult to manage the funds as it has to balance the three principles namely equities, diversification and advantages from less efficient markets. The university wants to have its funds invested in these three markets and wants to have a good high level of return from these fund management activities so that it can survive well in times of inflation and slow economic growth. The problem here is that some of the options available are less liquid than other which means that the university might find it difficult to withdraw funds at the time of need and it might experience the adverse effects of the economy of USA.
The ancillary problems faced by the university are the annual inflation rate and the economic recession as the economy of the country is sometimes unpredictable. The annual inflation if reaches too high will lead to the funds return being used to cover the university’s increased costs.Whereas if the inflation rate is too low then the economic progress will be slowed down in the market and the GDP growth rate will decrease and the exchange rates might also have an adverse effect onthe university and this will lead to several problems.
The other ancillary problem is the economy as the economy is unpredictable and in this case the recession will lead to the students’ admission being low in the university and this, in turn, will lead to a fall in the cash inflows.In addition to this, the slowdown in the economic growth of the university will lead to people saving more and spending less and the interest rates will rise and a rise in the interest rates will also have an impact on the funds being managed...............
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