Feature

Summer Conference Report

Three major higher ed organizations converged in Honolulu to discuss the 'Campus of the Future,' while financial aid officers took the pulse of the economy.

Summer is usually the time for vacations, but for those in higher education, it's a time to mix business with pleasure at annual conference sites around the country. July saw two major events: the annual NASFAA conference in Seattle, and the joint NACUBO, SCUP, APPA "Campus of the Future" conference in Honolulu.

Learning After Loss

Well-planned online and distance offerings can give institutions of higher education the ability to keep education going in the wake of disaster.

The familiar rhythms of academia lend a comforting presence on college campuses. Each autumn as summer temperatures begin to fall, days shorten, and leaves flutter down, fresh-faced students arrive en masse, their futures pregnant with possibility.

Last year, however, as students and educators in the Gulf Coast region prepared for the onset of fall classes, an unexpected visitor interrupted the traditional proceedings: Hurricane Katrina.

In the storm's wake, nearly 1,600 lives were lost, property damage numbered in the tens of billions of dollars, and educational institutions found themselves in disarray.

Elizabeth Moore Rhodes, the director of distance learning and the educational technology support specialist for Xavier University of Louisiana, vividly remembers the destruction that the hurricane left behind. "Practically every building on campus had water in it," she says. "My office is in the library, and the library had 4 to 5 feet of water on the first floor."

The office spaces and holdings in the library were completely destroyed. A large computer lab on the library's ground floor was also ruined. Teachers and students alike sought safety and classes were canceled. "All of our academic programs were interrupted, even the distance courses. Everything was down until January 2006," says Rhodes.

Once faculty and staff members finally reconvened, it was clear that a new disaster plan had to be formulated-a plan with which, even if the campus' brick and mortar facilities were again damaged, distance learning could continue with the support of a reliable and flexible network infrastructure.

"We've developed short-term plans as well as long-term plans on how we can get communication back initially and then get our course management system software running again with the expectation that students could continue with their distance learning programs," says Rhodes.

The university is putting arrangements in place to provide faculty members with internet access at predetermined evacuation sites. Faculty members are also being trained extensively in the Blackboard course management system so they will be able to deliver content and administer tests in the event of another disaster. As for more long-term plans, the preparation is focusing on data transfer and the coordination of remote locations where-if the campus must be closed-all data cartridges and systems will be taken and where host servers will have already been lined up.

Katrina changed the scope of Xavier's distance education program, which first launched in 2003. Prior to the hurricane, education courses were not offered online at the graduate course level. But when New Orleans was evacuated, its school system collapsed and a large number of schoolteachers were out of jobs and displaced around the country. To help them, Xavier added online education courses to its roster.

Rhodes believes that if online courses were not added at Xavier following the storm, then teachers from the New Orleans area would have pursued their graduate studies elsewhere. "We met the needs of our audience," she says. "The students needed online courses; they couldn't come back to campus and they didn't have jobs here anymore."

At Loyola University New Orleans, students were moving into residence halls as Katrina approached. Forced to evacuate, they ended up dispersing to nearly 400 different institutions. The majority of Loyola's classes were canceled, although after a short shutdown of nine days, distance education programs in areas such as ministry, nursing, and health-care management carried on.

Bret Jacobs, executive director of Information Technology, attributes this continuity to having an actionable disaster recovery plan that had been rehearsed annually. "We were a little ahead of the curve because we had exercised our plan on a few occasions and had just completed our test for 2005 in March," he explains.

Still, says Jacobs, there were a number of challenges to combat. For a few days administrators were unable to act because of a complete failure in land- and cell-based telecommunications. The campus didn't have power for nearly a month. The Blackboard system wasn't operating for more than a week after the storm.

With such events in hindsight and to prepare for future disasters, the university has taken steps to apply lessons learned. Administrators have opted to move course management to a hosted site, so that they can shrink the nine days that Blackboard was down last time to, hopefully, zero days next time around.

Jacobs has also developed a "technology triage" that outlines what technologies would be restored in an interim time frame and what will not. As a member of the Association of Jesuit Colleges and Universities, the university is also exploring how it can work with sister institutions in the event of another shutdown.

Jacobs believes that hybrid courses, in which traditional classroom sessions are supplemented with online components, might ease idleness in the case of a future shutdown. "Our students are already in the habit of checking their assignments online and getting course materials, so the bridge is already there," he says.

While hybrid courses wouldn't continue without interruption in the event of a major disaster (since facilities would likely be damaged), they would provide a way for students to continue accessing coursework. Once any damaged facilities reopened, face-to-face instruction would then continue and be tailored to the distance learning that took place in the interim.

Unlike institutions in New Orleans, the University of Houston was not directly affected by Katrina. However, it experienced a storm impact all its own.

Around 1,000 displaced students from New Orleans enrolled at the university, with approximately 700 of those electing to take online courses that were added as part of a special "second start" semester that kicked off on September 20, 2005.

Marshall Schott, executive director for educational technology and university outreach, says that the distance learning programs provided a flexible and accessible means of accommodating the displaced students. Fortunately for all parties involved, the institution's administrators and faculty were already well versed in the intricacies of distance education.

The university's first distance learning program launched in the early 1980s, when courses were delivered to off-campus sites via traditional and videoconferencing instruction. Over the past two decades, the program has evolved significantly: Now courses are available by broadcast television, DVD, and online. Currently, University of Houston Distance Education enrolls nearly 20,000 individuals annually.

On the heels of last year's hurricanes, Schott and his team are developing contingency plans for environmental disasters that could occur in the Houston metropolitan area. In phase one, they are developing listservs for all courses so that faculty can maintain e-mail contact with their students in the event of an emergency. In phase two, which will take place in 2007, they are moving toward an environment in which faculty can activate a course shell, or template, to post syllabi, course materials, announcements, and other information through Blackboard Learning System-Vista Enterprise License. In addition, administrators are exploring remote-site hosting for the school's Vista servers, and faculty will be trained in effectively using the enterprise system.

Disaster or no disaster, the goal is to utilize distance education to improve learning outcomes. Like his counterpart at Loyola, Schott sees hybrid courses as a near-term growth segment. "Hybrid courses give faculty the opportunity to deliver material to students so they can come to class more prepared to engage in higher-level discussions and activities. Students like the convenience of one-day-per-week class meetings in a reduced seat-time format," he observes.

Most students taking online courses expect flexible and accessible support. They also often expect an immediate response. To this end, a university's support staff is critical to the effectiveness of a distance education program in the event of a disaster.

Support staff duties include, among other things, student registration, scheduling, and working on IT issues. Schott advises that procedures and staff members be evaluated regularly.

Comprehensive evaluations to ensure the quality and consistency of a distance learning program are also important, he says. "Learning outcomes and student satisfaction need to be benchmarked against standards for traditional classroom delivery. In order to ensure that you are measuring the right things, survey instruments unique to distance learning environments usually need to be created," advises Schott.

For the University of Houston, such surveying involves a two-pronged approach. The first element focuses on institutional effectiveness and assesses the extent to which faculty create an effective teaching and learning environment. The second element assesses infrastructure and learning support.Shifting Priorities

While University of Houston online educators welcomed an influx of new distance learning students to the Lone Star State (virtually, at least), Mark Hendricks viewed firsthand the devastating impact that Katrina left behind. Just 10 days after the hurricane blew through, Hendricks, a system administrator for communications and information technology at the University of Nebraska-Lincoln, was in Gulfport, Miss., installing portable networks.

His mission? To rebuild internet service for a group of Virginia Tech medical students who were providing health-care services in the region. Once this task was completed, Hendricks and his team, armed with a satellite dish and radio, journeyed to Alcorn State University (Miss.) to help resuscitate the institution's online infrastructure.

Reflecting on his Katrina experience, Hendricks sees a glaring need for educational institutions to have recovery plans in place. "Universities need to make business continuity a priority," he says.

Indeed, administrators are coming to grips with the myriad complexities that accompany re-establishing distance education and related information and communications services following a disaster. Network infrastructures must be rapidly rebuilt. Information must be culled from off-site data storage sites. An operational hot site needs to be set up that will handle the needs of students, faculty, and staff.

Jacobs of Loyola attributes his institution's relatively quick recovery time to the fact that a hot site was actionable and exercised. Otherwise, he says, "We would have had almost insurmountable challenges." Schott notes that there are a number of challenges to keep in mind when putting contingency plans in place. In addition to exploring remote hosting, Schott and his team are also looking to build hot sites at the University of Houston's regional campuses that could provide backup support if the main campus were to be impacted.

Of course, it's not just hurricanes that are capable of disrupting educational pursuits. Colleges and universities can be hobbled by earthquakes, tornadoes, or even tsunamis. No region is insulated from potential terrorist attacks or the possibility of an influenza epidemic.

As the last handful of years have taught us, disasters can strike at any place, at any time. In an effort to ensure educational continuity, many universities have opted to collaborate with other schools.

Partnering with colleagues offers several benefits. "All institutions have strengths and weaknesses and can learn something from others facing the same issues," explains Hendricks. "Also, collaboration is probably the most economical way to ensure educational continuity."

Joining forces from a technological standpoint makes sense as well. There are a number of possible solutions to the impediments thrust upon distance education, but not all institutions are privy to the most recent advances. Strength in numbers makes the possibility less likely that a single catastrophic event can wipe out all remedies.

Hendricks provides an example using his employer. "If UNL buys heavily into satellite technology, and a solar flare takes out communications satellites for a period, it would be nice to have a partner like Texas A&M who is working with microwave networks to help us with our situation."

Joining an established consortium can also be beneficial. Organizations like the Sloan Consortium and American Distance Education Consortium can help administrators correspond with counterparts at other institutions. Such communication enables members to build a network while keeping abreast of possible resources that could help keep programs running, points out Hendricks.

Consortia also provide invaluable support in times of need. After Katrina struck, more than 150 colleges and universities joined efforts with the Sloan Consortium and the Southern Regional Education Board to offer an online institution. Dubbed "Sloan Semester," the initiative provided tuition-free online courses to students affected by the storm. The online catalog listed more than 1,300 courses, and, in all, more than 8,000 enrollments were processed.

"We went to the aid of people who needed it by contacting a number of institutions that could provide help," says Burks Oakley II, co-chair of the Sloan Semester Steering Committee.

If there was a silver lining to the impact that Katrina had on higher education institutions, it was the fierce support that the affected universities received from their brethren in a time of crisis. The hurricane also, no doubt, provided a resounding wake-up call in terms of disaster planning.

According to the 2006 Current IT Issues Survey conducted by EDUCAUSE, disaster recovery/business continuity was the fourth most common challenge in terms of strategic importance to chief information officers and others surveyed-up from number 10 the previous year.

Reflects Hendricks: "Katrina proved that institutions can move swiftly to find solutions. It would just be a lot smoother if there were already plans in place to recover from a disaster."

Chelan David is a freelance writer based in Seattle, Wash. He has recently written articles for EContent Magazine and Smart Business Los Angeles.

Faculty Issues in Online Education

A new book examines best practices in managing an online learning program.

Home, Sweet Home

Today's candidates for campus positions may well need a benefits package with housing assistance. Some institutions are hearing the call.

Last year, Catie Lasley, age 29, became the first in her family to purchase a house. Throughout her childhood, her parents had always rented apartments. While attending college, she lived in a dorm. Even after she was married, she and her husband rented an apartment.

CMS: Sticking with the Tried & True

Institutions are boosting their content management efforts with the use of commercial software while looking at open-source technology with a cautious eye.

As colleges and universities have put into placE large-scale content management systems (CMS) in recent years to take care of indexing and serving up their vast amounts of files, they have been making use of commercial products new and old to create these systems. Many of them have gone that route despite the availability of open-source alternatives, opting for safety over open-source promises of freedom.

But wasn't open-source technology supposed to be the savior of software budgets and vendor-stressed information technology (IT) departments? Its promise has been to give users the ability to get into the source code and make changes as they see necessary, without having to rely on a large, impersonal software company (or a small software company that may not be in business tomorrow) to make timely updates to the software.

True, open-source technology has been much talked about in recent years, but its uptake has still been slow.

In "The State of Open Source Software," a March 2006 report from the Alliance for Higher Education Competitiveness (A-HEC, a technology research organization serving the university and college market), A-HEC founder Rob Abel wrote that two-thirds of chief information officers at institutions of higher education have considered or are actively considering using open-source technology. Furthermore, about 25 percent of all institutions are engaged in implementing higher ed-specific open-source applications.

But that doesn't mean open source is a tidal wave. In fact, its popularity may be broad, but it's not deep. A significant switchover to open source from commercial software would have to take place for its "also-ran" status to change. "Despite much enthusiasm for open source, there are no signs that a large shift is occurring at this time," Abel writes.

Open source has been widely popular in Europe for years, with Spanish schools, French government agencies, and German municipalities adopting it enthusiastically. Governments there have pushed open source both out of national pride (choosing it over U.S.-based commercial software vendors) and as a way to keep costs down.

I would be
delighted to use open-source technologies anywhere we can. But when you get to
a high-level
application such as content
management,
I haven't yet
seen open source that
fits the criteria we have."-Larry Bouthillier, Harvard Business School

In many cases, they adopted e-government initiatives far earlier than U.S. agencies and municipalities, and they have kept up the momentum. A 2005 survey by the Maastricht Economic Research Institute on Innovation and Technology about open-source use in Europe found, for example, that 98 percent of local Spanish authorities used open-source applications.

Open source is also widely popular in U.S. higher education, but IHE technology professionals are choosy about where they use it. They tend to employ it in smaller bits of programming (or in the tools programmers use to create and modify their programs) rather than in large, complex, mission-critical programs, say tech leaders.

Whatever the current status of open source's adoption, it's unlikely to disappear from the modern campus. "In the university environment, you're never going to outlaw open source," says Jeff Ernst, vice president of marketing at FatWire Software, a maker of a commercial CMS product. "You're always going to have the kids who are going to be enamored with getting into the source and doing whatever they want." Ernst says his customers tell him they have open-source elements throughout their systems, especially on "renegade" sites run by students or small departments, but not on mission-critical websites such as those used for recruitment.

Open-source CMS products do exist, such as PostNuke and Mambo Server, as do communities of users who are supporters of open-source CMS, such as the aptly named OpenSourceCMS website. But users are not necessarily convinced the products can do the job.

"I would be delighted to use open-source technologies anywhere we can," says Larry Bouthillier, director of educational technologies and multimedia development at Harvard Business School. "When you go up to a high[-level], total application such as content management, the thing I haven't yet seen is open source that fits the criteria we have."

When HBS staff needed to catalog their rapidly expanding library of video content, which had outgrown the abilities of earlier solutions, they used ClearStory Active Media, a commercial product. The application indexes the videos and supporting files (such as Microsoft Word documents or PDF files) so they can be served up easily to faculty and students searching for the right files.

HBS's case is a good example of a CMS that has evolved over the years. In late 1995, the institution started streaming video on campus. "We've always had lots of video in the curriculum-interviews with protagonists, documentaries, etc.," says Bouthillier. "But it required scheduled viewing, and students and faculty would all have to go someplace to view it." Over the years, IT staff wrote common gateway interface scripts to help users find videos on the system. They also added capabilities to:

Scan the videos and provide snippets of text and snapshots of video scenes to prospective viewers;

"Support can be a challenge if you run into software problems, depending on who developed the code.
If you purchase a particular software package from a vendor, you get support." -Deb Wells, Bowling Green State University (Ohio)

Automatically detect the bandwidth capacity of viewers to deliver to them the video at the top quality their system is able to handle; and

Include podcasting and RSS feeds for users with the ability to access them.

The system is now about 50 percent commercial product, and 50 percent home-grown, according to Bouthillier. HBS also recently implemented a Wiki solution, to which users across campus can add information.

Open-source options that used the script language PHP (see glossary, p. 66) simply didn't work well with the rest of the business school's system. So officials chose Confluence Wiki software from Atlassian Software Systems. "We looked at all the open-source stuff and at the commercial stuff, and we ended up going with the commercial product because it was the one that would allow us to integrate into the rest of our system," says Bouthillier.

Even open-source advocates such as Virgil Wong, head of web services for Weill Medical College at Cornell University, have shied away from using it on content management systems.

When the college was looking for a CMS solution in 2005, administrators considered both open-source and commercial products before choosing Element115 running on the FatWire Content Server. "As an academic institution, we see open-source technologies as much more of an academic challenge," says Wong. "Our sense was that with open-source technologies, building project plans is extremely difficult, predominantly because of the uncertainty of open-source products. The tools we looked at had very little support. Ultimately, no one is accountable for maintaining the security of your content management system. You're at the mercy of any rescuers who might arrive."

That's not a risk he wanted to run with his system, which has about 184,000 unique visitors each month. In the year-long process of internal meetings and consultations to refine the requirements of the system and evaluate the possible solutions, Wong also wasn't able to find open-source help that would let him assemble a project plan.

Support "can be a challenge if you run into software problems, depending on who developed the code," says Deb Wells, manager of web development at Bowling Green State University (Ohio). "If you purchase a particular software package from a vendor, you get support."

BGSU leaders began looking at CMS in 2002, when the systems were starting to become affordable enough for universities to consider, notes Wells. The goal was to move from having every website looking different and following different style rules to a more unified look and feel that would also simplify content creation by non-technical users.

They selected Rhythmyx content management solution from Percussion Software. Rhythmyx not only provides a way for non-technical users to create web content without having to learn HTML or Adobe's DreamWeaver web-creation software, but it also provides support.

"We don't have enough staff to support [all of the departments], so this product is great," says Toby Singer, executive director of IT at BGSU. Bouthillier is contrarian on open source and support. "For the most part, buying a commercial product because you want support is often disappointing," he says, adding that there are exceptions among the vendors.

The far-reaching nature of CMS is a big part of the reason for caution among campus tech leaders about adopting open source. If an isolated component of a department's website goes bad, or if the student newspaper posts the wrong editorial cartoon one day, the damage or embarrassment isn't too great. But modern CMS setups are typically campuswide, aggregating content from every department and serving it up to faculty, students, administrators, alumni, prospective students, and others.

Venkatesh Korla, former director of software engineering at the Rush University Medical Center in Chicago, had to address two seemingly contradictory needs a couple years ago when looking for a CMS solution for that institution. He was looking for something that was broad like any enterprise-level CMS solution to aggregate information from disparate content creators and provide it to disparate users inside and outside of the hospital; he also needed a solution that was specific to health care organizations, however.

Those requirements led to his team creating the foundation for Element115, a spinoff of RUMC for which Korla now serves as president. Element115, the technology used by Wong at Cornell, incorporated typical requirements of health care organizations that make up, by his estimate, 80 percent of the CMS solution, which is then customized as needed for the remaining 20 percent. Health care institutions have their own taxonomy and semantics that need to be considered when serving up information in different ways, depending on whether the user accessing the information is a doctor at the hospital or a prospective patient researching his or her illness.

"The biggest challenge they have in an academic institution is to come to an agreement of what content they want and how they want it to work together," says Korla. "It is surprising that these academic institutions, which have so much content like a publishing house, don't have the [content management technology] like a publishing house."

Good Data In, Good Data Out

IHEs put in systems to capture quality data, and keep those records clean.

When database records indicated that 200 students had signed up to play on the 2004 football team at DePauw University (Ind.), Administrative Upgrade Project Director Daniel Pfeifer realized there was either something seriously wrong with how data was being handled, or the university would be ordering a lot more uniforms.

Endowment Management: New and Proven Strategies

Keeping a pulse on the economy helps today's endowment managers in their quest to bring their institutions the best returns possible.

Many of the answers to your endowment building questions may be found in tried-and-true investment strategies, but you may need to look farther-all the way to the other side of the globe.

From covering risks to increasing international investments, endowment managers at universities and colleges, as well as investment firms, continue to pay close attention to the economy-in the U.S. and globally-as they look to identify new ways to build endowments.

Short credit is playing a key role in endowment strategy, say managers, because credit spreads are much too narrow and they're likely to widen.

And, as credit spreads widen, they impact equities, fixed income, and most hedge fund strategies.

Credit spread is the spread between Treasury securities and non-Treasury securities that are identical except for quality rating. The term can also refer to an options strategy where a high premium option is sold and a low premium option is bought on the same underlying security.

"Clients for the most part are not rewarded for taking risks in this environment, so we're trying to protect against this," says Dick Anderson, practice leader for higher education at St. Louis-based Hammond Associates Institutional Fund Consultants.

The need for short credit is created by the liquidity in the economy, which raises asset prices. What that means, he says, is that the higher price you pay for an asset, whether it's stocks or bonds, the lower the prospective returns.

"That's the trend," Anderson says. "As people are fooling with that trend and are taking more risks than the prospective rewards, we're trying to counter that by buying protection, and specifically we've been buying credit production, short credit funds."

So while investors are taking more risks, Hammond Associates is working with clients to reduce risks.

"The notion is that everyone is embracing risk," Anderson says. "Our intention is to back away from risk."

A move toward more international investing is another trend that's cited by college and university endowment managers around the country.

"Increasingly we are allocating assets to non-U.S. common stock in both developed and emerging markets," says Jeff Davis, senior vice president for finance at the Kansas University Endowment Association, which has an endowment portfolio for The University of Kansas valued at $950 million.

KU's endowment strategy, Davis says, involves considering allocations that more closely reflect each region's gross domestic product.

"We're increasingly looking more globally rather than just locally in the U.S. for investment opportunities," he says. This includes looking more toward international developed markets and international emerging markets.

"I think the underlying thesis is that if you look at world economies and where growth and opportunities are, it's not just in the United States," Davis adds.

"We're increasingly
looking more
globally rather than
just locally in the
U.S. for investment
opportunities."
-Jeff Davis, Kansas University
Endowment Association

Jeff Margolis, director of Institutional Sales and Marketing at TIAA-CREF, a New York-based financial services organization, has noticed that there is definitely a secular trend toward international exposure.

The trend, he says, is likely to continue "as the world, excluding the United States, grows faster than the United States itself," says Margolis, who serves as head of business development for TIAA-CREF Asset Management.

Davis says KU is also looking to increase its allocation to international bonds. "When you look at where the productivity and economic growth is in the world, it's more globally distributed than it was years ago," he says.

Jonathan Hook, chief investment officer for Baylor University (Texas), reveals that the institution moved its international allocation up last year. It's a tactic that has paid off nicely.

"In terms of strategy we are continuing to diversify further," Hook reports. He says the institution is also using diversification as a "first-line measure against a market downturn." Baylor, with a $750 million endowment, has incorporated short credit into its portfolio, he adds, and a goal is to add some return into its domestic equity portfolio.

In addition, its portfolio now has a sub-asset class within the real assets category of investments (those that are physical or identifiable, such as gold, land, or equipment). "We think it will be a lower-risk asset class with good-not necessarily great-returns and be very uncorrelated to the markets," he says.

Further, Baylor is looking into the possibility of recasting its asset allocation to divide its portfolio between different themes or strategies as opposed to the traditional style boxes. The work is in process now and will not be finished for a few more months, at which time it will reach a formal approval stage, Hook says, adding that "it has gotten good response from those who have seen it so far."

Ron Neville, chairman of the Investment Committee of the Drury University (Mo.) Board of Trustees, says he believes his institution is ahead of the curve compared with its peer group. His evidence: Going back more than 15 years ago, Drury made a 20 percent commitment to international equities, which was unusual at the time. "And still today we have a higher commitment than the rest of our peer group," Neville adds. The university has an estimated $75 million in endowment funds.

Diversification is the motivation for Drury's investment strategies, Neville says, but what's been going on in the last month in the markets is flying in the face of that.

The typical situation used to be that if the U.S. markets declined, foreign markets might go up, Neville explains. "But in the last month, U.S. markets have gone down, international markets have gone down, gold's gone down, oil's gone down-everything."

"Another reason for diversification is that a lot of people are predicting that the dollar versus foreign currencies will continue to be weak, so foreign assets will remain stronger. That's helped Drury in the last few years."

Jud Koss, managing director of Commonfund, which manages approximately $36 billion for more than 1,600 educational institutions and other nonprofits, says he sees more and more IHEs turning to outsourcing.

He's not talking about the kind of outsourcing already in place at most institutions-where they hand over aspects of the investment management process to organizations outside the college or university-but rather when an external provider takes over responsibility of the day-to-day management of a majority of an institution's investment funds.

Koss says one of the reasons that "mega" endowments, such as those at Harvard and Yale, just keep getting bigger is that they each have entire internal management companies dedicated exclusively to their endowment's management.

Successful endowment investment becomes more complex, he says, as diversification becomes more important. The number of asset classes has grown from three to 10 or more, yet many colleges and universities just don't have the luxury of full-time staff.

"We are continuing to
diversify further and
using diversification
as our first-line
measure against a
market downturn."
-Jonathan Hook, Baylor Unversity

Further, over the last five years, there's been a marked shift toward investments in classes of alternative assets, such as real estate, commodities, venture capital, private equity, oil and gas, timber, distressed debt, and hedge funds.

The 2006 Commonfund Benchmarks Study shows that most endowments and foundations are using alternative investments to a greater extent, as well as active asset allocation, diversification, and risk management, to maximize both returns and intergenerational equity.

John S. Griswold, executive director of the Commonfund Institute, Commonfund's research and education arm, says the leaders achieved significantly higher returns by increasing allocations to alternative strategies and reducing allocations to domestic equity in 2005.

"This indicates institutions' greater need for special expertise in due diligence, risk management, and proper diversification of an alternatives portfolio," he says, responding to the study.

The trend has meant sub-categories, each carrying a different risk of loss, impact, return expectation, and higher levels of derivative risk. "These schools don't have the manpower to observe all the investments needed to obtain the diversification," Koss notes.

Another Commonfund study, the 2005 Educational Endowment Report, showed that the 707 institutions participating have an average of 1.2 full-time equivalent staff members. But staff size varies widely, usually in proportion to the size of the endowment, according to additional Commonfund research.

Michael West, treasurer and vice president for finance and administration at Skidmore College (N.Y.), believes it is likely that smaller to mid-size schools like his will follow successful strategies used by the larger schools. The college grew its endowment from $35 million in 1993 to more than $220 million in 2006.

Those strategies, he says, will include moving out of traditional U.S. stocks to low correlative investments such as hedge funds, and using different strategies within that asset class with specialized managers, such as investing in distressed securities.

"This trend will result in many more managers, even for relatively small portfolios," West says. "Also, there is likely to be continued movement to international investing, as returns are attractive, diversification is improved, volatility in returns are minimized, and as the world economy grows at a faster pace than the United States."

Those kinds of changes, West says, will be difficult for smaller to mid-size schools because generally they do not have access to the best managers in these asset classes due to investment minimums, frequent personnel changes, and closed funds. Also, smaller colleges are more limited in the risk profile that they can take on, he says.

"Generally smaller and mid-size colleges do not have the resources-staffing and related time-to manage these complicated, changing, volatile investments," West maintains.

"These schools generally cannot compete with the salaries on the street, nor recruit or retain the highest-quality professionals, and they don't have the economies of scale larger schools can achieve by spreading the costs of investment management over a larger pool of assets."

The Commonfund Benchmarks Study released in January, which covers 729 private college and university endowments, public educational endowments, independent school endowments, and private foundations in support of education, showed 32 percent of the institutions are expecting to increase their alternative strategies allocations. Twenty-four percent said they expect to decrease domestic equity allocations, and 16 percent expect to decrease cash and short-term allocations. Few expect to make any change to fixed income allocations. International equities expectations are split, the study shows, with 14 percent anticipating a decrease, and 10 percent an increase.

West says that although firms are forming or have recently incorporated to contract or outsource investment management, and pooled investment vehicles do exist, generally results are uneven, or untested over different market cycles.

TIAA-CREF's Margolis acknowledges that college and university endowments are outsourcing "a bit more," but he says it is still not pervasive.

According to Commonfund, the outsourcing trend is being fueled by the lack of time university and college trustees, specifically investment committees, can give to endowment strategy.

Calling it a "conundrum faced by the twin trends of growing complexity and static resources," Commonfund CEO Verne Sedlacek, in a commentary published last winter in CFQ, the firm's quarterly booklet, questioned whether the investment committee model is the optimal way to manage a portfolio.

The article poses this question: How can trustees exercise their responsibilities in a manner consistent with that of a fiduciary and how a group of individuals can focus their limited resources in a way that can fully address all of the issues spanning everything from high-level policy to manager selection?

That's what Commonfund's managing director Koss wonders too, saying that some trustees get caught up in what he calls the "downstream stuff"-such as rebalancing portfolios-when they should pay more attention to the upstream, big-brain picture.

"Those are things that these folks shouldn't get mired in," he says of what lies downstream.

However, West gives Skidmore trustees a lot of the credit for the college's significant endowment growth.

"We have a higher
commitment [to international
equities] than
the rest of our peer
group. ... A lot of
people are predicting
that the dollar versus
foreign currencies will
continue to be weak."
-Ron Neville, chairman of the
Investment Committee of the Drury
University Board of Trustees

"As our trustees become more engaged appropriately in investment policy and strategies, and more invested in the college, and choose to spend more time with us, we gain their valuable expertise, and access to their contacts. Frequently they see the difference their contributions and the contributions of others make and they donate more money to the college," West says.

Further, the trustees are able to reflect on deals or managers and consider what's good for Skidmore.

"This engagement, reflection, and judgment is far superior than a paid consultant's advice giving the college historical data on performance of a fund, or the r?sum? of a fund manager," West says. "This is a critical difference, I believe."

He cites Arthur Zankel, former chair of the investment committee and longtime member of the board. According to West, it was Zankel who more than a decade ago led the college to looking at investment classes, including alternative investments, hedge funds, and real estate.

"Skidmore's portfolio structure looked more like a university than a small college," West says. It was Zankel's connections and those of other trustees, along with Zankel's national reputation, that allowed Skidmore to get into funds generally closed to schools of Skidmore's size.

"His and others' direct knowledge of a fund's management team, their investment philosophy, mistakes, lessons learned, and experience trumps a third party or report on these important and critical issues," West points out.

Zankel, whose two sons attended Skidmore, helped recruit other strong investment professionals to the board. Today, Skidmore's investment committee remains strong, and Zankel recently left Skidmore $42 million in his will-"clearly a transformative gift for the college he loved," West says. "Leadership and appropriate engagement makes a difference."

Toni Cardarella, a freelance writer based in Kansas City, Mo., specializes in business and finance topics.

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