Investment Fund Limits Withdrawals For Colleges Nationwide
About 1,000 colleges across the country are seeing once again the impact of the credit crunch on Main Street. Last week, withdrawals from an investment fund that had been used much like a checking account to pay bills were temporarily halted, leaving administrators scrambling to find other sources of financing.
Troubled lender Wachovia was the trustee of the $9.3 billion Short Term Fund before stepping down from its role Oct. 2. Now, Wachovia is trying to work out what it calls “an orderly liquidation process” for the fund’s assets.
As reported Oct. 2 in the Wall Street Journal, higher education institutions have been putting their cash into the Short Term Fund, which is managed by a Connecticut-based not-for-profit called Commonfund, for more than three decades. The fact that it may now take years for investors to get all of their money back from what they thought was a conservative investment that offered slightly higher returns than U.S. Treasury bills leaves many schools understandably concerned.
Assumption College in Massachusetts is among the institutions affected by the liquidation of the Short Term Fund. The school had approximately $20 million invested in the fund, and has been able to withdraw only about a third of that amount. The treasurer at the college said the changes involving the fund not only were an “inconvenience,” but also came as “an unexpected shock.”
Following Wachovia’s announcement to restrict investor redemptions and liquidate assets in the Short Term Fund, Commonfund took action to limit withdrawals from a second fund it manages - the $1 billion Intermediate Term Fund. Redemptions in the fund were capped at 30% for each investor account.
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