The HBCU Money™ Weekly Market Watch


Our Money Matters /\ April 17, 2015

A weekly snapshot of African American owned public companies and HBCU Money™ tracked African stock exchanges.

NAME TICKER PRICE (GAIN/LOSS %)

African American Publicly Traded Companies

Citizens Bancshares Georgia (CZBS) $9.90 (0.00% UNCH)

M&F Bancorp (MFBP) $4.96 (0.00% UNCH)

Radio One (ROIA) $3.91 (1.24% DN)

African Stock Exchanges

Bourse Regionale des Valeurs Mobilieres (BRVM)  264.34 (0.44% UP)

Botswana Stock Exchange (BSE)  9 805.50 (0.01% UP)

Ghana Stock Exchange (GSE)  2 262.96 (0.09% UP)*

Nairobi Stock Exchange (NSE)  173.20 (N/A)

Johannesburg Stock Exchange (JSE) 53 734.04 (0.97% DN)

International Stock Exchanges

New York Stock Exchange (NYSE) 11 063.73 (0.95% DN)

London Stock Exchange (LSE)  3 778.37 (0.92% DN)

Tokyo Stock Exchange (TOPIX)  1 588.69 (0.67% DN)

Commodities

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Good News/Bad News: Percentage Of HBCU Graduates With Debt Drops But Debt Loads Increase


By William A. Foster, IV

Debt is the slavery of the free. – Publilius Syrus

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A follow up to our internal study two years ago on HBCU student loan debt shows a “good news, bad news” situation for those graduating from HBCUs hallowed grounds. Slightly less are graduating with debt than two years ago, but those who are graduating with debt can expect those debt loads to be heavier. A troubling sign as wages stubbornly refuse to rise despite an arguably healthier overall economy in terms of employment. I say arguably because African America still remains the only group in this country experiencing double digit unemployment and largely dependent on employment from non-HBCU owned businesses. Add to the fact African American households earn 35 percent less than the national average and 50 percent less than Asian American households who have the highest household income in the nation; there will be a good deal of continued penny-pinching ahead for HBCU graduates. Although, one has to wonder at this point if we are not squeezing blood from a turnip as the old saying goes.

HBCUs served 99 percent of the African American population obtaining higher education prior to desegregation while today that number has dwindled to the neighborhood of 10 percent. This steady but precipitous decline over the past 60 years has had long-term impacts on HBCU endowments not least among them the probability of producing high quality donors and large alumni populations. The latter being integral since only an average 13 percent of America’s alumni donate. Wealth or lack thereof is also playing a role for African American families and the rising HBCU student loan debt. African American families have recovered mildly since the recession, but the median wealth gap between European/Asian and African American families is well over 20:1 as of 2012. Institutional wealth is also part of the spider web of student loan debt. The institutional wealth gap as a result of desegregation is even scarier with the top 50 endowments (all PWI/HWCUs) having a combined $330 billion versus 100 plus HBCUs with approximately $2-3 billion. All of these factors contribute to an ongoing burden by families, HBCUs, and HBCU support organizations to try and reduce student loan debt for HBCU graduates.

The results were paired against America’s 50 largest universities by endowment which surprisingly varied by geography, public and private status, and school size eerily similar to that of HBCUs. The Project on Student Debt reports in 2013 that 69 percent of all college graduates have student loan debt and the average debt of that graduate is $28 400. Both numbers are up from two years ago, when the figures were 66 percent and $26 600, respectively. The latter puts average debt rising almost 7 percent in the past two years.

The number in parentheses shows the comparative results from the universities of the 50 largest endowments:

Median debt of HBCU Graduate – $30 344 ($22 020)

Proportion of HBCU Graduates with debt – 88% (45%)

Nonfederal debt, % of total debt of graduates – 6% (23%)

Pell Grant Recipients – 69% (17%)

The statistics show that HBCU students are still 28 percent more likely to graduate with debt than the national average, a figure that was at 35 percent two years ago. A sign that the nation is catching up to the HBCU indebted way of life. HBCU graduates are 96 percent more likely to graduate with debt than someone from a school with a top 50 endowment, which is higher than the 93 percent two years ago. Unfortunately, there is no way to break out the African American student loan debt data of those attending those HWCUs which would help control for family resources playing an integral part in the difference. Given top 50 endowments ability to provide more low-income based aid; it is a safe assumption that the student loan debt is potentially lower for African Americans at HWCUs both in terms of percentage of those graduating with debt and debt loads. Over the past two years, median debt for HBCU graduates has risen 5.4 percent in comparison to top 50 endowment schools of only 1.4 percent. Both groups though are below the aforementioned national average over the same time period.

The most telling sign of just how vital endowments impact student loan debt appears in the median cost of attendance for HBCUs versus top 50 endowment institutions. Top 50 endowment institutions cost almost three times as much or 177 percent more than HBCUs in terms of median total cost of attendance. Despite this HBCU graduates are still twice as likely to finish with debt and with more of it is a disturbing reality of just how big the institutional wealth gap is. HBCU graduates are finishing with almost 38 percent more student loan debt burdens than their top 50 endowment institution counterparts. A problem that will have very long term systemic wealth building implications if not attacked ferociously. Currently, the median net worth or wealth for African Americans is the lowest among all groups in this country at $11 000. In comparison, Asian and European American median net worth is $91 440 and $134 008, respectively.

As I said two years ago, we could spend years playing the blame game of why this situation is as it is. Unfortunately, African America does not have that kind of time. Two years later, it seems even harder to believe that the HBCU community has any more grapple or workable solution on this problem than before. There seems to be a foregone conclusion that student loan debt is just a part of life and as is the case with most things in this nation when America catches a cold, then African America catches pneumonia. The question becomes just how much debt and how fast it accumulates will ultimately determine the sustainability factor for how long-term benefits will be reaped by graduates, their families and communities. Unfortunately, HBCUs are caught between a rock and hard place in needing to desperately raise tuition to generate more revenue because of weak endowments, but doing so increases an already over-sized burden on their graduates long-term and making it even less likely they will become the donors that the institutions desperately need. It has become a vicious cycle and with so much of African America and America invested in the demise of HBCUs that it seems only a miracle will keep us from perishing.

The Endowment Edge: A Conversation With The University Of Virgin Islands’ Dr. Haldane Davies


HBCU Money’s editor-in-chief, William A. Foster, IV, sits down with the Foundation of the University of Virgin Islands’ executive director Dr. Haldane Davies. They discuss the importance of HBCU endowments, UVI’s phenomenal leap into the HBCU Money’s 2014 top ten HBCU endowments list, and Dr. Davies take on the economy’s impact on college endowments.

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Dr. Davies, thank you for taking the time with us. Let us start with telling us a bit about yourself and how you came into your current position? Thank you, Bill. I am certainly honored to have the opportunity to speak with you today and to share with your audience what the Foundation for the University of the Virgin Islands and indeed the University of the Virgin Islands has been doing over the last fifty three years of its existence. My name is Haldane Davies and I am from the Virgin Islands. I hold a Doctor of Philosophy degree in Educational Administration with a focus on higher education from Andrews University and have been at the University of the Virgin Islands for the past eight years. In addition to my current position of Vice President for Business Development and Innovation, I also serve as the Executive Director of the Foundation for the University of the Virgin Islands – a 501 (c) 3 organization, a position that I have held for the past four years.

Many HBCUers do not understand the way an endowment operates. Tell our audience more about the process. When a donation to the University of Virgin Islands is given, how is it invested and how are those decisions made? Great question. As you know, Bill, the process of fundraising is one that occurs over time after periods of relationship building and donor cultivation. Donors contribute to a cause that matches the institution’s value proposition to the donor’s vision and purpose for which they intend the gift to be used. Therefore, when a gift is made to the University or to the Foundation on behalf of the University, that gift is invested in accordance with the donor’s gift agreement and the applicable clauses of the Foundation’s Investment Policy Statement under the guidance of the Finance and Investment Committee and the full Board. The funds are usually distributed across an approved asset allocation planning model with investments in equities, bonds, and other alternative asset classes, with provisions made for hedging by including a mix of other investment options along a continuum of conservative and aggressive distributions of the funds to be invested. The Finance and Investment Committee would be mindful to ensure that great care is taken to maintain an adequate spending ratio in support of the University while making every effort to maintain the goal of achieving intergenerational equity by not spending too much or too little in any given year thereby maintaining the real spending power of the endowment for future generations.

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 The University of Virgin Islands this year cracked our HBCU Money™ top ten HBCU endowments, largely attributed to the university’s impressive 48.5 percent increase in investments. What do you attribute to the endowment’s success over the past twelve months? I must say that we are extremely honored to be among the top ten HBCU endowments in terms of investment asset I would be the first to indicate however, that while the difference between total investment assets from 2013 to 2014 jumped significantly by an impressive 48.5 percent, the actual investment return for the same period was 19.2 percent, which exceeded investment returns among all HBCUs that participated in the NACUBO Commonfund Study of Endowments. This is indeed a great accomplishment of which we are justly proud. We are appreciative of the outstanding work of our investment advisors/managers who exercised prudent judgement and responsible decision making by selecting outstanding investment managers and investment options that yielded the kind of returns that we benefited from last year. It was a good year for the U.S. equity market, in particular. I am also mindful to note the fiduciary oversight of the Finance and Investment Committee and the Board in working closely with our advisors/managers and exercising patience by maintaining a “we are in it for the long haul” attitude toward investing.

The endowment gap between PWI/HWCUs and HBCUs has grown from 46:1 in 1993 to 106:1 today. What do you think are some ways that gap can start to be closed, especially with HBCUs facing mounting financial pressure? Is there anything the University of Virgin Islands is doing in particular? As stated previously, the Foundation for the University of the Virgin Islands has taken a “long haul” approach to investing for optimal gain in support of the mission of the University. The University actively engages in fundraising and maintains a Memorandum of Understanding (MOU) with the Foundation for the management of its assets alongside those of the Foundation. There is strength in the collaborative pooling of assets with the true intent and purpose of strategically and meaningfully responding to the needs of the University and the constituencies which it serves. As HBCUs, we also need to actively engage in business development and innovation activities that result in public/private partnerships, contracting services, and leveraging the expertise of faculty, staff and students to create income generating opportunities in collaboration with the institution. At UVI we believe that when we are able to promote a value proposition that is in tandem with the needs of our communities, donors, and supporters we would be better positioned to reverse the trend and begin the process of closing the gap to which you referred. Although budgets are tight and government and other types of mainstream support for HBCUs and other institutions are dwindling, there are opportunities for growth if we would develop innovative ways of advancing our causes through collaborative strategic planning, linking the budget to the plan, identifying the best talent to execute programs and services, conducting rigorous and meaningful assessment, and using results to improve. These may be the “worst of times” but they may also be the “best of times.”

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 In terms of investment strategy, does UVI primarily internally manage its endowment; use external managers, or a mixture of both? UVI through the Foundation primarily uses external managers who are guided by the organization’s Investment Policy Statement, and who have the flexibility within reasonable limits to make timely investment decisions in the overall interest of the Foundation and the University. We vet and monitor our managers well and require regular reports not only on the performance of the funds but also on their investment point of view and scenario projections based on current and historical market data.

The S&P 500 over the past year had returns of 13.4 percent. The benchmark by which we measure endowment return success. This past year only six out of the top ten HBCU endowments outperformed the market, while PWI/HWCU counterparts had nine out of the top ten outperform. What do you attribute this disparity too? That is a very good question and the answer may lie in a number of places. Generally, although size may not always be a determining factor in the level of endowment returns, it certainly plays a significant role especially in keeping with the asset allocation model that may be right for the institution at the time. PWIs generally are much more heavily endowed than HBCUs with higher percentages spread across a wider cross section of illiquid options, thus lessening risk and increasing yield over the long term. Secondly, some endowments are very conservative in their asset allocation models, which may be based on the risk averseness of the Investment Committee. Additionally, we need to do a better job in developing our asset allocation models and using the best managers with track records of stable yet outstanding returns for their clients. We need to study the markets well, increase our knowledge by engaging in professional development activities for our boards, and holding our directors and staff more accountable for the performance of our organizations. Endowments grow and perform well through strategic investment growth and contributions to the funds.

Capital circulation is a big principle we believe in here at HBCU Money. Does UVI have any relationships with African Diaspora owned investment firms or financial institutions in general? If so, was it a conscious decision and why? If not, is there any plan in the future to have a relationship? Although most of our investments are within the US market which includes a mix of investment firms, we certainly participate in private equity investments globally including those in emerging and frontier markets. While I am not at this time prepared to speak in detail on FUVI’s investments, I can say that every effort is made to invest in opportunities and places where our investments stand a very good chance of yielding good returns. We pay close attention to the global economic outlook and point of view and make decisions that would best serve the interest of our organizations – UVI and FUVI. We certainly support investments with African Diaspora investment firms as part of our overall investment strategy.

Many investors seem to believe the Federal Reserve will be raising interest rates this year. What impact will this have on college & university endowments? With every action, there is usually a corresponding reaction, however, our view is long term and we are not unduly alarmed with the current trend of market volatility. Whether the Feds raise interest rates in the summer or the fall, we expect the markets to respond but settle in a favorable place over time. After all, rising interest rates may be viewed as a sign of a strengthening economy. Market corrections are needed from time to time; however, we are not fazed by daily adjustments but rather encouraged by long term performance.

Private equity and hedge funds seems to have had a major role in college and university endowments over the past decade. These are very capital intensive and illiquid investment classes, which seem to make it tougher for HBCUs with smaller capitalized endowments to engage. Is UVI making investments in either of these assets classes? If so, what percentage of the school’s endowment portfolio is in them? If not, do you foresee investments in these classes in the future? We currently have a mix of hedge funds, distressed debt, and private equity investments in our portfolio amounting to about 10 percent of the Foundation’s assets. We are also in the process of adding some core real estate investments (about 5 percent) and making allocation adjustments to help create an optimal balance in liquidity and intergenerational equity. With some limitations, opportunities for smaller endowments to invest in illiquid and alternative strategies such as hedge funds, venture capital and private equity are readily available in the marketplace and offered by advisors/managers who have great expertise and track records in this important diversifying space.

For those interested in one day becoming the head of a university endowment what advice would you give them? Become familiar with endowments and foundations and how they work by attending endowment/investment conferences, workshops and institutes to the extent possible. Speak frequently with your investment managers engaging them in broader board and committee educational meetings focusing on the successful tenets of governance, oversight and endowment management. And examine their investment outlook in tandem with market trends and historical performance. Read, familiarize yourself with the market jargon, be courageous, and engage in strategic and informed decision making.

Thank you for your time; in parting do you have anything you would like to add? HBCUs and their universities and endowments have a very important role to play in providing and supporting educational opportunities for many who may otherwise not have the opportunity to pursue higher education. We are responding to a high calling – a calling that is beyond any of us to touch lives, fulfill dreams, ignite passion, create opportunities, improve the quality of life, advance knowledge, and increase wisdom. HBCU endowments and foundations have the capacity to be wellsprings of creative opportunity and beacons of hope for many in a shaded world. Let us commit to doing our best for humankind today and for generations yet unborn as we help to make this world a better place for all. Thank you so much, Bill for the opportunity to share with your audience. I look forward to talking with you again.

Unemployment Rate By HBCU State – February 2015


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STATES WITH RISING UNEMPLOYMENT: 2

STATES WITH DECLINING UNEMPLOYMENT: 15

STATES WITH UNCHANGED UNEMPLOYMENT: 7

MEDIAN UNEMPLOYMENT (HBCU TERRITORIES) – 5.6%

LOWEST: OKLAHOMA – 3.9%

HIGHEST – DISTRICT OF COLUMBIA – 7.8%

STATE – UNEMPLOYMENT RATE (PREVIOUS)*

ALABAMA –  5.8% (6.0%)

ARKANSAS – 5.5% (5.6%)

CALIFORNIA – 6.7% (6.9%)

DELAWARE – 4.8% (5.0%)

DISTRICT OF COLUMBIA – 7.8% (7.7%)

FLORIDA – 5.6% (5.7%)

GEORGIA – 6.3% (6.4%)

ILLINOIS – 6.0% (6.1%)

KENTUCKY – 5.2% (5.5%)

LOUISIANA – 6.7% (7.0%)

MARYLAND – 5.5% (5.5%)

MASSACHUSETTS – 4.9% (5.1%)

MICHIGAN – 5.9% (6.3%)

MISSISSIPPI – 7.0% (7.1%)

MISSOURI –  5.5% (5.5%)

NEW YORK – 5.8% (5.8%)

NORTH CAROLINA – 5.3% (5.4%)

OHIO – 5.1% (5.1%)

OKLAHOMA – 3.9% (3.9%)

PENNSYLVANIA – 5.2% (5.1%)

SOUTH CAROLINA – 6.6% (6.6%)

TENNESSEE – 6.6% (6.7%)

TEXAS – 4.3% (4.4%)

VIRGINIA – 4.7% (4.7%)

*Previous month in parentheses.

HBCU Money™ Business Book Feature – The Wall Street MBA


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You don’t need an MBA to master corporate finance

“Finally, the book which may put Harvard Business School out of business. A must-read for all professionals who seek strong financial expertise.”
—Rick Rickertsen, Managing Partner, Pine Creek Partners; author of Buyout

“Terrific overview of corporate finance and accounting that even the nonfinancial professional will find useful.”
—Ken Glazer, former Senior Competition Counsel, The Coca-Cola Company

The Wall Street MBA distills a broad swath of corporate finance and financial reporting concepts into a concise, practical, and easily accessible format.”
—Robert Borghese, lecturer, The Wharton School; author of M&A from Planning to Integration

The Wall Street MBA gives you the tools to:

  • Review financial statements
  • Analyze earnings
  • Detect fraud
  • Assess stock prices
  • Value companies
  • Determine the cost of capital

With brand-new chapters on currency trading, real estate valuation, and commodities

HBCU Money™ Dozen 4/6 – 4/10


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Did you miss HBCU Money™ Dozen via Twitter? No worry. We are now putting them on the site for you to visit at your leisure. We have made some changes here at HBCU Money™ Dozen. We are now solely focused on research and central bank articles from the previous week.

Research

Finding out your newborn’s genetic fate could soon be reality. So could these moral dilemmas l New Scientist ow.ly/LpZag

IBM, Fujifilm show tape storage still has a long future l CIOonline trib.al/GO03jyq

Healthy oceans need sharks: The Shark Stanley’s new book l Pew Environment bit.ly/1JsL0Ae

Carbon Markets Could Soon Cover Half of North America’s Population l Clean Technica dlvr.it/9KNM9n

US challenges China in supercomputing race with 180-petaflop system l Computerworld ow.ly/LpZwj

New York state has 1,744 MW of wind capacity, an increase of 3,500% since 2005 l Renewable Cities ow.ly/LpZFX

Federal Reserve, Central Banks, & Financial Departments

Investing in public transit now can help cities avoid a high-carbon future l World Bank wrld.bg/LinoK

Could DNA from a mother’s bacteria be making its way into the genes of her offspring? l World Economic Forum wef.ch/1NaaNxo

Lack of access to surgical care accounts for a significant portion of the global disease burden l World Bank wrld.bg/LouoI

Can you teach creativity? l World Economic Forum wef.ch/1HvdDuQ

Asian families are catching up to (and in some measurements, have surpassed) white families l St. Louis Fed bit.ly/1CYZOnX

Why science says it’s a good idea to keep a diary l World Economic Forum wef.ch/1LRSBNB

Thank you as always for joining us on Saturday for HBCU Money™ Dozen. The 12 most important research and finance articles of the week.

African America’s March Jobs Report – 10.1%


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Overall Unemployment: 5.5% (5.5%)

African America Unemployment: 10.1% (10.4%)

Latino America Unemployment: 6.8% (6.6%)

European America Unemployment: 4.7% (4.7%)

Asian America Unemployment: 3.2% (4.0%)

Previous month in parentheses.

Analysis: Overall the unemployment rate went unchanged. Latino America was the only group with a rising unemployment rate of 20 basis points. Asian America retains America’s lowest unemployment rate, tightening an even firmer grip with an 80 basis point drop. African America saw a decrease of 40 basis points and remains the only group with double digit unemployment.

African American Male Unemployment: 10.0% (10.4%)

African American Female Unemployment: 9.2% (8.9%)

African American Teenage Unemployment: 25.0% (30.0%)

African American Male Participation: 67.2% (67.3%)

African American Female Participation: 61.4% (61.3%)

African American Teenage Participation: 25.7% (29.1%)

Previous month in parentheses.

Analysis: African American males saw a 40 basis point decline in unemployment and a 10 basis point drop in participation rate. African American females experienced a rise in their unemployment rate 30 basis points, but maintain their single digit unemployment rate. They also got an uptick in their participation rate 10 basis points. African American teenagers had their unemployment rate decline by 500 basis points, but also their participation rate dropped a precipitously 340 basis points.

CONCLUSION: The overall economy added 126 000 jobs in March. Wages also saw a slight increase of 0.3 percent, overall. After a year of average job gains for the country at almost 270 000 jobs per month, this marks an over 50 percent decline and sparks concern among many economist. African America added only 7 000 jobs, bringing four straight months of five figure job gains to a screeching halt. The albatross are the teenagers who took a massive hit in employed numbers and their participation rate, dragging down the overall group. At current labor force levels, African America needs 40 000 jobs to obtain 9.9 percent unemployment. With weakening economy data that maybe harder to accomplish as growth both domestically and internationally appears to be grinding along.