Friday, May 21, 2010

Morgan Stanley Real Estate Funds V and VI Go Belly Up; and What's the Nexus Between Dartmouth and North Carolina?

Morgan Stanley Real Estate Funds (MSREF) V and VI, which were the beneficiaries of Dartmouth's conflicted investment policy (Dartmouth Charter Trustee R. Bradford Evans is a Managing Director at Morgan Stanley), are apparently tanking - fast.
As indicated in the last post (see below), Dartmouth invested $20 million in MSREF V in March 2005. It also invested an undisclosed amount in MSREF VI in March 2007. The investment committee that manages Dartmouth's endowment investments (Dartmouth has been operating without a Chief Investment Officer since David Russ left Hanover to head Credit Suisse's Investment Strategies group last June) is overseen and directed by the Board of Trustees.
Now those Morgan Stanley funds are hitting the skids: according to a December article in the Wall Street Journal, MSREF V lost quite a bit of money. The California State Teachers' Retirement System had a $137 million investment in MSREF V. By last summer, the value of that investment was $300,000.
WSJ also reported that MSREF V bought eight luxury properties at the top of the market in 2007, taking out a $1 billion mortgage to finance the deal. That mortgage was subsequently carved up into mortgage-backed securities and sold to investors.
The Wall Street Journal reported on May 11, 2010 that SEC investigators are currently looking into bringing criminal charges against Morgan Stanley for misleading investors about collateralized-debt obligations (CDOs) tied to mortgage-backed securities. But Morgan Stanley's real estate division came in for investigation well before that: according to a March 2009 article in the New York Times, Morgan Stanley reported to the SEC that its star real estate investor in China had violated US law by bribing Chinese officials in Shanghai to smooth out a few multimillion dollar investments.
MSREF V wasn't the only Morgan Stanley real estate investment to flop. MSREF VI also lost 61% of its value between 2007 and today. It might lose $5.4 billion on its original $8.8 billion, making it "the worst loss in the history of private real estate equity." That report comes from the Carolina Journal, which documents the decline of North Carolina's state pension fund, also invested heavily in MSREF V and VI.
In an interesting coincidence (?) Carolina Journal reported in October 2009 - in a story headlined "New Questions Surround Ousted Treasury Official and Fund Managers" - that Pamela Joyner '79, a Dartmouth Charter Trustee, acted as the "placement agent" for a 2005 deal that invested $150 million from the North Carolina state pension endowment into a fund run by Apollo Investment Management, founded by Dartmouth Charter Trustee Leon Black '73.
The same article also raised questions about the relationship Joyner and her husband, whose firm Horsley Bridge Partners managed $225 million of the NC state pension, had with a state treasury official who was recently fired. A law professor at Duke, James Cox, commented that "it is certainly something that raises eyebrows and needs explaining."

More on the Troubling Conflicts of the Board of Trustees

From the Tellus Institution's report (p. 33), more accounts of serious conflicts of interest among the trustees, just in the last 5 years. Listed below are the trustees, their firms, and the funds in which the College invested its endowment money:

P. Andrews McLane, T.A. Associates, T.A. Associates Fund XI - undisclosed sum
R. Bradford Evans, Morgan Stanley, Real Estate Fund VI International TE, L.P. - undisclosed
R. Bradford Evans, Morgan Stanley, Global Best Ideas Fund, L.P. - undisclosed
Russell Carson, Welsh Carson Anderson and Stowe, WCAS L.P. - $20 million
Russell Carson, Welsh Carson Anderson and Stowe, WCAS IV, L.P. - $10 million
Russell Carson, Welsh Carson Anderson and Stowe, WCAS X, L.P. - $15 million
Jonathan Newcomb, Leeds Weld & Co., Leeds Weld IV - $10 million

Information from the New Hampshire Department of Justice, previously obtained by The Dartmouth Review, indicates that Brad Evans' Morgan Stanley received at least $65 million in Dartmouth investments: $20 million for its Real Estate Fund V International in March 2005, and $45 million for its Global Best Ideas Fund in November 2006.

All told, Dartmouth put $110 million of endowment money into funds managed by the trustees.

The report notes very appropriately, "When such a concentration of trustees is involved in managing endowment assets, conflict-of-interest policies of disclosure and recusal from decisions related to one's own firm may provide inadequate assurances of independent oversight."

Yep.

"Egregious" Conflict of Interest

Dartmouth's investment policies are questionable at best, and now BusinessWeek has picked up on it with a story on elite colleges' role in fomenting the speculation excesses of the Naughty Aughties (the 2000's).

The key quote:

“Dartmouth provides the most egregious example of conflicts,” said Joshua Humphreys, lead author of the report and founding director of the Center for Social Philanthropy at Tellus, on a conference call. He lectures at Harvard. “Can you imagine the investment committee meetings at Dartmouth? Basically half the room has to leave including the chairman of the investment committee.”

Humphreys is referring to the Trustees' practice of investing the College's endowment money in funds that are managed by Board members themselves - not a bad helping hand to those funds! Examples cited by the article included:

$40 million to Leon Black's Apollo Global Mangagement
$10 million to Steve Mandel's Lone Pine Capital
$10 million to William Helman's Greylock Partners

Thursday, May 20, 2010

Thursday News Update

  • Professor Tse has created one of those visual tricks that will undoubtedly end up in your e-mail inbox at some point down the road. Nifty. (Amusingly, NewScientist lists Dartmouth as being located in New Jersey.)
  • Professor Pease should be pleased to know his new autobiography of Dr. Seuss got a favorable review from New Statesman columnist Amanda Craig.
  • The men's crew teams should be congratulated; USRowing's Men's varsity eight poll has ranked Dartmouth #8, leapfrogging them seven slots forward from the #15 slot and the lightweight team has pierced the top five to come in at the #4 spot.

Tuesday, May 18, 2010

Wednesday News Update

  • Visiting Assistant Professor of Economics Charlie Wheelan wants his $25 back from United Airlines for losing his baggage. Good luck with that, Professor, but your first mistake was flying on United with their legendary baggage handling skills.
  • Professor Blanchflower's as busy as ever. His crystal ball predicts that another European bailout package to ward off the Acropolis Apocalypse is "inevitable." In addition, the new governing coalition in Britain will "Snap by the End of the Year."
  • Tuck recently did a study that found that peer-to-peer networking is a "treasure trove" of leaked health care information.
  • Ms. Vanessa Seivers '10 will get around to that job she was elected to. Eventually.
  • There's "gutsy" and then there's "faking your way into Harvard." The last is best illustrated by one Adam Wheeler, who came this close to graduating from that lesser institution of higher education. He faked his SAT, transferred into Harvard claiming to be a transfer with a straight A average from MIT (in actuality having just been dismissed from Bowdoin for academic dishonesty) and was only caught because he applied for Rhodes and Fulbright scholarships and a professor noticed some pretty blatant plagiarizing. This guy is the Aleksey Vayner of Cambridge.

Monday, May 17, 2010

Health Care Delivery

You can't say that it is completely unexpected, given Kim's consistent advocacy on this issue. If any initiative is right up his alley, then it's this one. Altogether, in addition to the policy improvements it will hopefully yield, this new Center for Health Care Delivery Science could make Dartmouth more of a national and global name in education and research. That's a great thing.

Kim's announcement is certainly very exciting, and it suggests that Kim does have a style that is big and bold. He coordinated the announcement with an op-ed in today's Washington Post. He badly wants Dartmouth at the head of the national discourse on health care. In a lot of ways, this flows nicely with an advantage that Dartmouth already has: the Dartmouth Atlas of Health Care has been making news throughout the health care debate, and between the Med School's solid reputation and the resources of Dartmouth-Hitchcock Medical Center, "health care delivery science" is a niche that Dartmouth can rapidly fill.

The College's press release contained a quote from Ed Haldeman that suggested this won't be the first big initiative we see coming out of the Kim administration:

The Trustees and I fully expect that this is the first of a number of initiatives Dartmouth will launch in the coming years. This spring President Kim and Provost Folt are launching a strategic planning process that will identify other initiatives that build upon Dartmouth's many strengths.

I hope so, because as exciting as this new initiative is, and as big an issue as health care delivery is, it's still a niche issue not tailored to an undergraduate institution. Undergrads in the natural sciences, social sciences, and humanities will appreciate the massive public policy ramifications, but our education won't be defined by Kim's new center.

In addition to the master's degree in health care delivery science that is planned to start enrolling students in July 2011, Kim said in the press release and on the new Center's website that the College is also going to put forward undergraduate offerings in the field. As long as it's a few courses, that sounds great. But there have been rumors floating among faculty members for months now that Kim might be interested in introducing a "Health Care Delivery" major, a move that would seriously compromise the College's core liberal arts mission by focusing undergraduates on a very narrow field of public policy/medicine.

So for now, optimism. As pertains to undergrads, it will be extremely interesting to wait and see what moves the College makes to integrate this new center with undergraduate education.

Pres. Kim, Saving World Again

I'll say this about President Kim: he doesn't slow down. This landed in Blitz inboxes this morning.

May 17, 2010

Dear Members of the Dartmouth Community,

Today we are announcing the creation of The Dartmouth Center for Health Care Delivery Science, supported by a spectacular commitment of $35 million from an anonymous donor. The donor believes that Dartmouth is uniquely positioned to lead the advancement of this critical field. More about this new enterprise is included in the following press release (http://www.dartmouth.edu/~news/releases/2010/05/17.html) and at TDC.dartmouth.edu.

Provost Carol Folt and I expect we will identify other major initiatives that draw upon Dartmouth's unique strengths as the strategic planning process continues.

This is an exciting moment for Dartmouth. This gift recognizes the excellent work of our faculty and the collaborative strength of this academic community. The gift also expresses the will of a generous donor to help us tackle one of the most challenging issues of our time.

Sincerely,
Jim Yong Kim
President, Dartmouth College

Friday, May 14, 2010

Syracuse, Columbia Commies Carry Contempt for Capitalist Commencement Speakers

Over at NRO, Charlotte Allen has an amusing article on students at Columbia and Syracuse who dislike their commencement speakers. Why? Well, they committed the great crime of being bankers. The students should relax. At least they never have to worry about the specter of Timothy "TurboTax" Geithner in that role.

Tuesday, May 11, 2010

Swede Students Shut Down Free Speech

Occasionally, I'm reminded of how thankful I ought to be that I go to Dartmouth where folks of all stripes are level headed enough to hold a discussion or attend a talk without shouting down a speaker or, you know, assaulting them with confectionery like Cornellians do.

The same can't be said for Swedish students of an indeterminate religion at Uppsala University, who shut down a lecture by artist Lars Vilks on, you guessed it, free speech. In the past he drew an unnamed religious figure with the body of a dog. For this, he received death threats, which is a totally reasonable response.

Friday, May 07, 2010

Bizarre Blitzes, Godawful Grammar

I'm used to getting a cornucopia of unsolicited blitzes from activist organizations of which I was previously unaware, but the combination of gag-inducing imagery and ambiguous grammatical construction made this one special:

From: Standpoints
Date: 07 May 2010 01:25:41 -0400
Subject: May 12th- OSTRACIZED
To: (Recipient list suppressed)

May 12th- OSTRACIZED



9 out of 10 women develop fistula as result of complications in
childbirth


A WALK TO BEAUTIFUL

- Come see the powerful stories of a group of Ethiopian women who continue to

RISE
ABOVE

THE STIGMA OF FISTULA

Where: Brace Commons
When: May 12th 2010 @ 6pm with Prof. Sackeyfio

***** FOOD WILL BE PROVIDED BY THE ORIENT*********


Two comments:

9 out of 10 women develop fistula as a result of complications from childbirth, eh? Either there are a few words missing here or it's a veritable miracle that there are any women left walking among us.

There is literally no better way for upper middle class white students to talk about the debilitating illnesses of the Third World than over a steaming plate of Chinese food.

Wednesday, May 05, 2010

IvyGate Blog Adds Insult to Injury

It seems that the defamation of former trustee candidate Joe Asch has been revamped with one of the latest posts on IvyGate. Apparently an editor of the blog dug up some of the weeks-old campaign slander from the Daily D and regurgitated it into tonight's piping-hot Ivy League gossip. Too bad the post has garnered nothing but anger from the Dartmouth students and alums who've read it (check the post's responses).

Tuesday, May 04, 2010

And Now For Something Completely Different

You may have read Will Aubin's interview with Jonathon Recor MALS '10 in a recent issue of the Review, or read Aubin's brief blog post here about the Love March/Recor's B-day party.

Now you can witness it in all its strange glory on YouTube.

Saturday, May 01, 2010

LAX on CBS College Sports

It appears that the Women's Lacrosse squad's Ivy League Championship game will be broadcast tomorrow on CBS College Sports at 12:30 P.M. and then re-broadcast at 5:30 P.M. Wah-hoo-wah!