Penn avoids borrowing money

Though Penn’s endowment might be billions of dollars smaller than Harvard University’s, Penn is besting the world’s richest colleges in its investment strategies.

According to an article in Bloomberg Businessweek last month, a slew of the nation’s wealthiest colleges — including Harvard, Yale and Stanford Universities — have recently borrowed large sums of money, as the bulk of their funds are tied up in investments.

However, Penn President Amy Gutmann said Penn has not needed — and does not plan to — engage in this strategy.

Lead by Chief Investment Officer Kristin Gilbertson and the Executive Vice President’s Office, Penn “prudently managed our finances so we didn’t, when hit by the recession, have to borrow money,” Gutmann explained.

Whereas other schools may borrow money when facing liquidity issues, Gutmann stressed, “we had liquidity. We still do.”

Gutmann said this benefit has partly enabled the University to continue its construction projects. By contrast, the recent Businessweek article highlighted other schools’ efforts to halt expansions, freeze salaries and eliminate jobs when strapped for cash.

Steven Goodman, an educational consultant, said the strategy other schools are employing is “risky for a lot of reasons.”

Though individual university’s investment philosophies differ just as neighbors’ mortgage sizes do, “the more conservative and prudent position that Penn is taking is one that makes sense,” Goodman said.

By not borrowing money to generate cash flow in the short term, Goodman added, Penn is acting as “more of an educational institution than an investment bank, and I think that’s a positive thing.”

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