Dr. Andrew Benton
University President
M E M O R A N D U M
TO: Campus Community
FROM: Andrew K. Benton
President
DATE: September 30, 2008
RE: Wall Street, the Credit Crunch and Pepperdine
While we may be far removed from New York City and Washington DC, the remarkable events of the past few days have our rapt attention. I thought it might be helpful to inform you a bit about how this may impact Pepperdine and I also want to enlist your help.
First, here are some things not to worry about:
– Our endowment is diversified and will outperform the market in this environment. Further our payout is determined by a five-year rolling average of investment returns (for just such a time as this I might add).
– We are managed conservatively and have no unusual exposures.
– Our reserves are deep and our credit rating is truly excellent.
Having said that, the challenge across the country is liquidity. We are acting, as I write this memorandum, to solidify our access to cash while we await the outcome of the conversation between Washington and New York. Regardless of how you feel about the “proposed bailout” we all care about our economy and the need for dependable credit and confident financial markets.
Despite our strength, it would be unwise not to be very, very cautious right now. To that end I ask that you rethink every major expenditure through the end of the calendar year. Let me explain why: Our cash does not sit in a vault; it is invested in short-term, financial instruments yielding revenue. Those who hold those instruments may not have the ready cash to liquidate them on the schedule we require. In other words, we need to prepare for the problems that may well be experienced by others. Such is the nature of our integrated economy.
We have a history of paying our bills early. We will now pay them on time. We will examine new contracts for goods and services with caution and we will review vendor requests for prepayments or deposits very carefully. Most will be approved, I suspect, but the length and depth of the present challenge is unknown. Succinctly, we need to increase our “inflow” and slow and reduce our “outflow.” Think about how you can help with both.
Tomorrow at the President’s Briefing (8:45 a.m. in Smothers Theatre) we will focus on how this complex economic upheaval is being addressed by the three largest providers of retirement services – TIAA-CREF, Vanguard and Fidelity. I will also provide some additional information about University impacts and we will reserve time for questions. If you cannot attend, we will place the program on the University website.
This is a good time for clear communication. If you have questions, ask them and we will respond.
I hope the year is going well for you. Please know how much I appreciate your service.
10-02-2008