Wednesday, December 17, 2008

YU Letter About Madoff ($110 Million Lost)

The following is the letter President Richard Joel of YU sent out regarding the investments YU had with disgraced ex-Sy Syms School of Business chairman Bernard Madoff as placed there by YU trustee and investment chairman J. Ezra Menkin. The basic summary: 8% of the YU endowment was with Ascot Partners (Menkin), which invested that all with Madoff. The net loss from that is $110 million, which added to previous losses amounts this year comes out as a 28% loss this year, from $1.7 billion to $1.2 billion. YU has hired a law firm to help investigate and set a higher standard of conflict policies and procedures and governance structures.

Full letter on expand.

Dear Yeshiva University Community,

I would like to speak with you, members of the Yeshiva University Community, about recent events in the news. As a result of the last week's revelations regarding Bernard Madoff, much concern and speculation has arisen regarding Yeshiva University. I write to you to make our situation clear.

Before going further let me reassure you:
  • 1. The University is financially strong.
  • 2. Be assured that our levels of scholarships and financial aid will not diminish.
  • 3. Yeshiva University staff pensions are not impacted by this revelation.
  • 4. Our leadership, faculty and students are engaged and advancing.
  • 5. We will learn all appropriate lessons from this experience.
  • 6. We have been engaged over the last two months in reviewing our budgets to seek ways to cut our operating costs due to global economic realities. We will continue to do so and remain committed to advancing our crucial mission of providing an education that ennobles and enables our students
Bernard Madoff is no longer associated with our institution in any way. The University had no investments directly with Madoff. Last Thursday night, we were informed by Ascot Partners, a vehicle in which we had invested a small part of our endowment funds for 15 years, that substantially all its assets are invested with Madoff. The Ascot fund was managed by J. Ezra Merkin who has served as a University trustee and chairman of the investment committee. Mr. Merkin has resigned from all University positions.

In the most recent statement from Ascot, Yeshiva's investment was valued at about $110 million, which represents about 8% of our endowment. While these facts are disappointing, we need to remain focused on the larger picture. We are but one of many institutions and individuals that have been impacted.

Let me be clear regarding our financial position: the University's endowment, taking into account the Ascot loss, is currently estimated to be approximately $1.2 billion, down from approximately $1.7 billion on January 1, 2008. That loss of 28%, calendar year-to-date, compares with an S&P loss of 38% and Dow Jones loss of 32%. While certainly this represents a painful decline, we are in the same or better position as many universities. Although this decreased endowment must factor into our long term fiscal plans, it will have minimal impact on day-to-day operations. Total income from endowment last year represented 13% of the University's operating income. Much more critical to our future health is the continued level of financial support from the YU family, philanthropists, and friends. So, while we are in a healthy and strong position to move forward, we must use the moment to address all concerns that this situation has illuminated.

In light of recent developments, we have decided to examine our existing conflicts policies and procedures, and governance structures. To assist us in this process, we have engaged Sullivan & Cromwell and Cambridge Associates, internationally renowned and respected institutions with recognized expertise in corporate and institutional governance, to ensure that our policies, procedures and structure reflect not only best practices, but the gold standard -- the standard to which we aspire for all our endeavors. We will be working closely with our advisors over the coming weeks and months and I'm confident that we'll emerge stronger than ever.

I must add a more personal thought. We all should use these times to reflect on our blessings but also to reflect on our responsibilities. We should constantly be communally introspective and focus on advancing our ideals. The times are appropriate for us to focus on our core values, to practice and refine them and to share them with the world. We can and should always advance. Yeshiva University is committed to engaging in that conversation with other people of good will. I thank you for your interest, commitment and support.


Richard M. Joel

President, Yeshiva University


  1. ...that substantially all its assets are invested with Madoff.

    I don't understand how so many people and funds put 100% or near 100% of their assets into a single fund. That makes no sense.

    I'm just one guy and I've got my retirement funds in several places -- and two of those places are index funds. (The other is a money market fund.)

  2. JA - Depends on how diversified the place is. Especially if each place is charging fees, you might have much lower fees putting it in one place and not be concerned if the place seems to be well-diversified. You'd also look at the returns and see if they seem balanced as opposed to shooting up/down with specific markets, and here you'd see that, too.

    Still agreed in general, but not so crazy that people would do such a thing.

  3. They make a point that they rely significantly upon philanthropical support. It would be interesting to know if they are seeing a drop in that support, and what level of drop.

    I know at the lower end of the scale, many a yeshiva has seen 30% drops in donations, with some yeshiva's seeing as much as 68% drops.

  4. Sorry Ezzie, but your explanation of why someone or an institution would invest all of their assets (as Ascot did) in one fund doesn't make such investing sound any less crazy. I don't come from an extremely wealthy family where we all discuss our investment strategies over dinner, but all my life I've heard that you should never put all your eggs in one basket. If someone like me, who has no financial training whatsoever, knows that you should not have all your investments in one mutual fund company, let alone all in one fund within a company, then how in the world did people more sophisticated than I do such an amazingly dumb thing?

  5. Akiva - I doubt that they'll know for a while...

    Fern - That's just it: The point of investing in a place like a mutual fund, a hedge fund, etc. is because it's NOT putting all your eggs in one basket. When you invest in such a place they're typically investing in tens, hundreds, even thousands of different things. A fund I used to audit had about 2,000 different holdings at the end of a typical year. That's not in one basket at all.