Higher Education: Resources and Finance

By Seymour E. Harris | Go to book overview

ing lot. Because of the lack of competition, these afford a higher rate of return with relatively little risk.

We have pioneered in the development of equipment trusts covering cars and trucks leased to companies of high credit standing in much the same way freight cars are leased to the railroads. Just recently we started leasing 8-ft. in diameter neoprene containers, suitable for the transportation or storage of liquids or flowable solids, to a major chemical company at an attractive rate. Again, not being hemmed in by legal restrictions, we have been able to place real estate mortgages up to 100 per cent of the value of the property. Of course we do this only when the credit of the lender is of top quality. . . .

Oil payments, ship financing, lease-backs, private placements, and numerous other unusual transactions are available to the enterprising endowment fund manager if he will keep an open mind in looking for sound and profitable deals. The nice thing about these investments is that they usually produce a fixed return higher than that available from bonds and provide a reasonably rapid amortization so that funds are flowing back all the time for use as other opportunities open up. . . .

The University of Chicago has also profited greatly from its interest in the Encyclopaedia Britannica, a gift of Sears, Roebuck and Company. Senator Benton provided working capital of $100,000, for which he received common stock, and the university received preferred stock and royalties on copies sold. Apparently, after the Rockefellers, the Encyclopaedia Britannica has been the largest contributor to the income of the university.9


FOOTNOTES
1
J. H. Cain, What Is Happening to College and University Investment and Income?, American Council on Education Studies, 1941, p. 29.
2
I owe this to T. E. Blackwell, "The Prudent Man Investment Rule in College Endowments," College and University Business, May, 1955, pp. 45)- 46).
3
C. R. Sattgast, Administration of College and University Endowments, 1940, p. 88; and J. L. Kirkpatrick, "Accounting for Investment Income," Proceedings College and University Business Officers, 1947, pp. 54-60.
4
See, for example, E. L. Hawthorne, Fund Raising for the Small College, p. 126; also on the issue of accounting, see Ralph S. Jones, "Accounting for Endowment Funds," College and University Business, March, 1951, pp. 25-28; and J. L. Kirkpatrick , op. cit., pp. 92-98; S. E. Harris (ed.), Higher Education in the United States: The Economic Problems, pp. 232-34; College and University Endowment Investments, p. 26.
5
See earlier discussion of market versus book value. Annuity contracts involve an exchange of a capital sum given to the college for designated annual payments, generally for life.
6
Wall Street Journal, Apr. 12, 1947.
7
Since the IHL studied are not identical, the results can be held to be rough only.
8
J. P. Hall, "Don't Be Afraid of Unorthodox Investments," College and University Business, December, 1955, pp. 23-24.
9
H. Kogan, The Story of the Encyclopaedia Britannica, pp. 253-279.

-492-

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