Often the phrase “don’t worry” actually leads to more worrying. Despite a 10 percent decline in MSU’s business portfolio, which is mostly made up of endowments, MSU officials have told students not to worry.
The university has divided its investment portfolio into short-term, mid-term and long-term investments. The short and mid-term money isn’t affected much by the economy and therefore will help the university ride out the difficult times. Officials said the university can endure a three-year period of economic trouble without being hurt too much.
This 10 percent drop, credited to a declining financial market, equals about $140 million from the university’s $1.4 billion investment portfolio. Doesn’t that seem like a lot of money? That amount of money could more than pay for every student’s tuition. In itself, 10 percent also is quite a large decline. Imagine losing 10 percent of your savings — that could cripple you financially. The university needs to show a little more concern about this drop in endowments.
What if this economic downturn doesn’t turn up in three years? How will the university be able to cope? Will there be enough long-term funds in three years for the university to use? The current economy is uncertain and the university should be better prepared for the economic future.
Officials have said the slumping financial market directly affects the long-term investments. Currently, the long-term investments are in equities and stocks, which are slumping badly. The endowments put into long-term investments were basically thrown away during the latest economic downturn.
The university needs to re-examine where it is putting its money and should invest its finances in something more stable and guaranteed, such as bonds and certificates of deposit. Investing in bonds would be a very smart solution based on the time frame in which the university is prepared. When three years pass by, money invested in bonds would greatly help the university. While investing in CDs involves looking further down the road, it is still important at this point in time because it is unknown when the economy will consistently be on an upswing. These investments will better guarantee the university will have the proper long-term funds.
In the short term the university won’t be hurt much by the economy, but it won’t be improved either. Maintenance will be delayed throughout campus, which could lead to inadequate facilities.
If the short-term economy isn’t fixed and endowments continue to decline, there won’t be any long-term investments to lean on.
The university is prepared for the short-term problems, which is good. But it is not prepared enough for the future.
As the state government gives less and less money to MSU, it is important to realize endowments are becoming more and more important. Investing in stocks and equities is does more harm than good. The money needs to be in a more stable position.
The public has been told not to worry, but hopefully the university will.
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