Monday, March 05, 2018

Harvard arrogance gets a just reward

They put donor money into the hands of investment "experts".  The experts did well out of it but Harvard did very badly.  Trust in experts is a very foolish game. In managing my share portfolio I go by form and form only.  And I weathered the 2008 collapse unscathed

If only because of weather variability, farming is a very tricky and unpredictable business even for someone who has been doing it all his life.  To think you could do it by remote control was real hubris

Six years ago, Jane Mendillo, then head of Harvard’s endowment, spent a week in Brazil, flying in a turboprop plane to survey some of the university’s growing holdings of forest and farmland. That year, Harvard began one of its most daring foreign adventures: an investment in a sprawling agricultural development in Brazil’s remote and impoverished northeast. There, workers would produce tomato paste, sugar, and ethanol, as well as energy after processing crops. The profits, in theory, could outstrip those of conventional stocks and bonds and keep the world’s richest university a step ahead of its peers.

Harvard bet the farm in Brazil and lost. The university, which invested at least $150 million in the development, is now exiting, according to people familiar with the matter who requested anonymity because they aren’t authorized to discuss the investment. The venture contributed to the decision by its current endowment chief, N.P. “Narv” Narvekar, to write down the value of its globe-spanning natural resources portfolio last year by $1.1 billion, to $2.9 billion. Harvard, which manages $37.1 billion, has said those investments produced strong returns but now face “significant challenges.” Current and former officials otherwise declined to comment.

Harvard made many mistakes over the last decade, according to Thomas Gilbert, a finance professor at the University of Washington, but almost all of them boiled down to a single miscalculation: the belief that its top money managers—who were paid $242 million from 2010 through 2014—were smarter than everyone else and could handle the risks almost all other endowments avoided. “They became loose cannons,” Gilbert says. “When you’re managing donor money, it’s appalling.”

Harvard over the past decade ended June 30 posted a 4.4 percent average annual return, among the worst of its peers. It even lagged the simplest approach: Investing in a market-tracking index fund holding 60 percent stocks and 40 percent bonds, which earned an annual 6.4 percent. Some of Harvard’s blunders have been well-chronicled. Facing heavy losses after the financial crisis in 2008, Mendillo sold private equity stakes at deep discounts before they could recover. Her successor, Stephen Blyth, experimented with expanding the endowment’s in-house team of stock traders before retreating in the face of tens of millions of dollars of portfolio losses. Blyth stepped down in 2016.

But perhaps no bet damaged Harvard more than its foray into natural resources. The university invested in central California vineyards, Central American teak forests, a cotton farm in Australia, a eucalyptus plantation in Uruguay, and timberland in Romania. Harvard has been reevaluating and selling some of those investments, such as part of the Uruguayan plantation it sold to insurer Liberty Mutual last year. “The natural resources portfolio was supposed to be the crown jewel,” says Joshua Humphreys, president of the Croatan Institute, a nonprofit that focuses on sustainable capitalism. “But they were known for taking outsize risks, and those can cut both ways.”

Such investments haven’t always lost. Mendillo took the lead flipping U.S. timberland in the 1990s, delivering substantial profits when she worked for then-endowment chief Jack Meyer. Harvard similarly scored big gains when it bought and sold timberland in New Zealand in 2003. When Mendillo returned to Harvard after managing Wellesley College’s endowment, she tried for a reprise. This time she thought U.S. timber was expensive. Instead, Harvard could tap forestry Ph.D.s and other sharp minds to find opportunities in emerging markets, taking advantage of growing demand for scarce resources around the globe, she said in a 2012 Bloomberg interview.

Mendillo saw these investments as decades-long wagers, which her board embraced. “Natural resources is our favorite area,” she told a July 2012 investor conference. At the time, Brazil’s economy was booming, and the government was pouring development money into the impoverished, rugged, semi-arid northeast. The university, working with Brazilian private equity firm Gordian BioEnergy, established a company called Terracal Alimentos e Bioenergia, according to tax filings and people familiar with the matter.

Terracal planned to spend more than 5 billion Brazilian reals ($1.5 billion) on the agricultural complexes. The first development would transform thousands of acres around the remote town of Guadalupe on the Parnaiba River using modern irrigation technologies. By the time Mendillo stepped down as endowment chief executive officer in 2014, the economy in Brazil was slowing, and a government corruption scandal was deepening, spooking Harvard and other foreign investors.

The strategy paid off for one constituency: Harvard’s money managers. Alvaro Aguirre, who oversaw natural resources investments, made $25 million over four years, tax records show. His boss, Andrew Wiltshire, was paid $38 million over five years. Both have since left Harvard. Mendillo earned as much as $13.8 million in a single year.

Narvekar, who took over in 2016, has decided to shift most of Harvard’s investments to outside managers. While considering further writedowns of natural resources investments, he’s indicated that he may continue to hold some if they’re a good value now. A group of alumni from the class of 1969 recently had a suggestion for Narvekar: Invest in index funds.


When Activism Replaces Education: The Rise of New Civics   

The modern American university has increasingly become a place of walk-outs, demonstrations and protests. Students appear to spend more time waving signs and yelling their opinions across the quad than actually studying in the library. It seems that education has been replaced with activism. Because it has.

A report by the National Association of Scholars (NAS) reveals the infiltration of so-called New Civics programs that seek to replace traditional civics education with “service learning.” The report notes, “Instead of teaching college students the foundations of law, liberty and self-government, colleges teach students how to organize protests, occupy buildings and stage demonstrations.”

New Civics has become the means by which the New Left has repurposed higher education for progressive activism. Part of the goals of “fundamental transformation” include redistributing wealth, compromising the free market, advocating against the fossil fuel industry, expanding the welfare state, intensifying identity politics, elevating global “norms” over American law, minimizing our common history and ideals to a narrative of racism, misogyny and exploitative colonialism, and channelling university funding to progressive causes and “allied” programs.

While civics used to mean teaching students about representative government, the separation of powers and landmark Supreme Court cases, New Civics emphasizes participation in leftist causes. This they call “civic engagement.” While traditional civics prepared students to understand and steward a free society, New Civics teaches students how to deconstruct it. Rather than learning the foundations of the United States and the fundamentals of the Constitution, students learn how to fight the government and to solve grievances through protest rather than debate.

This civics ignorance is an enormous threat to our Constitution.

This trend of problem-solving through protest rather than debate has bled into popular culture as evidenced in the myriad of marches and protests our country has experienced lately: the March for Women, the March for Science, the March for Climate and Black Lives Matter, or marches for #notmypresident, illegal immigration, gun control, fossil fuel divestment, antifa, abortion, white supremacists, neo-Nazis, “LGBTQ” rights, and so on.

While differing views within a free society are inevitable and healthy, the solution to reconciling those differences consists in an honest debate about the merits and faults of those views, not in yelling at each other. This concept would be taught in a traditional civics class, which would, for example, discuss James Madison’s Federalist 10 on factions. A student would also learn that factions result from differing human opinions and only two ways exist to stop it: Either remove the causes or control the effects. Removing the cause means removing differing opinions (i.e. destroying Liberty through mandated groupthink and ideological conformity). Managing its effects takes place through the representative government process as described in the Constitution.

Traditional civics would teach students how to vote, how to write their congressman, how to run for office and how to participate in our republic. New Civics, by contrast, teaches students that rallies, protests and activism are the only way to change things. It teaches, by example, that change can only occur by destroying due process, the Rule of Law and the necessary confinements of government. This is what is meant by “fundamental transformation.”

Yet where did service learning originate? According to the NAS report, the service-learning pioneers composed of teachers, administrators and community organizers all “traced their commitment to service learning to their far-left political commitments.” William Ramsey began the first “service learning” program in 1965 at the Tennessee-based Oak Ridge Institute of Nuclear Studies. Robert Sigmon, whose motivations were to use education as “a tool to promote revolutionary change,” meaning leftist ideology, joined Ramsey in 1966.

Service learning combined the teaching theories of socialists John Dewey and Paul Freire, who emphasized learning through doing. The service learning model also incorporated the Open-Door Schooling movement of Mao’s Communist China. Under Mao, schools sent children, as part of their education, into factories and fields to learn socialism from workers and peasants. In addition, the ideas of Saul Alinsky, most notably community organizing (or organizing against the government) entered higher education through the service-learning method.

At first, this concept seems like a noble cause: to transform learning from simply memorizing data into a hands-on experience. Most people remember the “volcano” experiment of vinegar and baking soda for elementary science classes because they experienced the dramatic eruption. Yet a remarkable difference exists between hands-on experiments in science class and hands-on activism masquerading as “education.”

Additionally, the service-learning method not only compromises teaching, and the regular discipline of a university education, but it also compromises volunteerism, which should be voluntary, not required. Much of the joy found in volunteering is rooted in the concept of giving without receiving. When volunteering becomes compulsory, it ceases to be “volunteer.” Americans, by nature, tend to be others-minded and led by a spirit of volunteerism. New Civics takes advantage of that spirit and redirects it toward a progressive political agenda.

NAS notes that “New Civics advocates want to make ‘civic engagement’ part of every class, every tenure decision, and every extracurricular activity.” It thus has begun to change the authority structure from the faculty and professors to the administrators and offices of civic engagement, student affairs, diversity and sustainability.

New Civics sounds non-partisan and inclusive because it encourages students to “engage in the community.” Yet, the “community” narrowly means the community of progressive organizations. Using semantics and language to neutralize their objectives, service-learning progressive activists don’t call it progressive activism training, but rather civic engagement, community-focused projects, social justice activism, global civics, deliberative democracy, intercultural learning and a slew of other neutral terms designed to deflect real meaning.

While we face threats of terrorism and nuclear war, the often-overlooked threat is the university, which not only incubates leftist ideas but teaches students to actively engage against freedom, ironically calling it “civic engagement.” By replacing history with propagandistic “perspectives” and exchanging the teaching of the U.S. legal tradition with progressive deconstructionism, the New Civics movement has compromised the education of students, the merits of true volunteerism and the stewardship of Liberty in this country.


Australia: Sydney's extraordinary international student boom

Asians spooked by school shootings in America?

Overseas student numbers have surged at Sydney's universities during the past few years. While the number of foreign students has been trending upwards for years, the current growth is unprecedented in such a short time.

Foreign student numbers in Sydney jumped 50 per cent more in the past two years than they did in the entire decade prior.

The student fees being collected by the city’s biggest tertiary institutions capture the scale of this boom.

At Sydney University, overseas student fees rose 92 per cent in three years - from $391 million in 2014 to $752 million last year. At the University of NSW, consolidated revenue from overseas student fees jumped 26 per cent between 2015 and 2016 alone to a handy $560 million.

Sydney University and UNSW in particular have reaped the rewards in the recent race for the international student dollar.

More than one in three students at Sydney University is now from overseas, the majority of them from China.

But with such rapid growth - and big dollars - comes risk. Critics say universities are now over-dependent on the money international students can bring in, especially as government funding for teaching and research is squeezed. Others say the dependence on overseas - and especially Chinese - cash is “corroding the soul of our universities”.

Higher education is being transformed the world over as rising living standards in Asia, and especially China, drives unprecedented demand for tertiary qualifications.

“We are witnessing one of the largest investments in higher education and research in history,” says Laurie Pearcey, Pro-Vice Chancellor, International, at the University of NSW.

Academics and university administrators have emerged as improbable heroes in Australia’s export story.

Sydney’s universities are sought after as higher education becomes a mass global commodity and members of Asia’s new middle class aspire to degrees from institutions that rank well on international league tables.

Financial Times columnist John Gapper has labelled big urban universities “the new global brands” and a “core industry of city-states in a globalised world”.

The inner districts of Sydney - home to the city’s biggest universities - have benefited disproportionately from the surge in international student numbers.

Total employment in tertiary education in the inner-Sydney region jumped by 37 per cent between the 2011 census and 2016 census, analysis by regional economist Terry Rawnsley shows. It was a similar story in inner-Melbourne where tertiary education employment was up 28 per cent in the period.

Then there are flow-on effects from the money spent by students - and their visiting friends and relatives - on things such as accommodation, dining, retail and entertainment.

In 2016 the fee income from overseas students in NSW universities surpassed the fee income from domestic students for the first time. It now makes up a quarter of all university revenue in NSW and seems likely to rise further, as government funding comes under continued pressure.

“Successive governments have been actively encouraging universities to seek out alternative sources of revenue,” says Melbourne University education economist Michael Coelli.

Nationally, about one in three international students are Chinese, but the figure is double that at Sydney University and UNSW.

Last year nearly one in four of all students enrolled at Sydney University - the state’s biggest tertiary institution - were Chinese. That share was more than one in five at the University of NSW and one in six at the University of Technology, Sydney.

A NSW Auditor-General’s report in June found some of the state’s universities have become “vulnerable” to fluctuations in overseas students’ intake and drew attention to the sector’s “concentration” risk.

“The increasing number of overseas students can have significant financial benefits to a university,” the report said. “However, there are associated risks, including pressure on capacity constraints and the need to maintain teaching quality. There is also a concentration risk from reliance on overseas students from the same geographical location in the event of an economic downturn from that region.”

Even the Vice-Chancellor of Sydney University, Michael Spence, is worried about the dependency on the overseas student dollar. Back in 2014, amid debate about a controversial Abbott government proposal to deregulate university fees, Professor Spence told ABC television “we are over-dependent on international student fees”.

Andrew Norton, who heads the higher education program at the Grattan Institute, says that despite these concerns universities have decided the opportunities are simply too big to ignore. “The universities are taking the calculated risk that, even if it doesn’t last, the benefits are so great while it does last, that you should not forgo them,” he says.

Although Norton questions whether high academic standards can be maintained amid such rapid growth in student numbers. “I am concerned about the rate of increase and whether you can deliver the expected quality when you are expanding at that rate.”


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