You are here: Home / Other RW Issues / University of Sydney / Diving shares teach uni tough lesson

Diving shares teach uni tough lesson

THE University of Sydney will defer building projects after incurring a $160 million operating loss last year, due largely to the huge hit it took on its investments reports Heath Gilmore the Sydney Morning Heralds Higher Education Reporter on May 21, 2009.

The university's miserable year saw 23 per cent wiped off its $1.15 billion investment holdings by turmoil in the world's financial markets.

Income generated by the portfolio also fell by $75 million. To maintain financial liquidity, the university sold a number of equities at a loss of $45 million.

The NSW Auditor-General, Peter Achterstraat, yesterday disclosed the significant impact of the financial crisis on the university, saying the situation may require greater borrowing to fund capital expenditure, deferral of major building projects or research spending cuts.

His annual report on the state's 10 public universities showed NSW institutions incurred a combined operating loss of $66 million (a few institutions recorded a surplus). In 2007, the 10 institutions recorded a surplus of $388 million.

The University of Sydney's chief financial officer, Mark Easson, said the university was in a strong financial position with annual revenue of $1.29 billion.

He said core revenue had increased by $26 million for the first three months of this year, boosted by an increase in fee-paying foreign students.

Savings would be made by deferring teaching, research and office space upgrades as well as repairs and maintenance. Administrative costs would be tightened by providing shared services, with no impact on central teaching and research programs forecast.

"The [core revenue] figures are encouraging, especially after the tough year we have all just experienced," Mr Easson said.

"We remain debt free with a pool of discretionary funds [$300 million available for contingencies]. Our investment portfolio is well diversified and performed better than most similar sized balanced funds. We expect the value of our investment portfolio to recover in time."

A spokesman for the university, Andrew Potter, said fund managers had made portfolio changes on the university's behalf, taking a more defensive strategy with fewer shares and more stable bonds. He said collateralised debt obligations had never been part of the portfolio but only high quality bonds.

The Greens MP John Kaye said the university risked moving from one vulnerability to another. "Their investments lost almost a quarter of their value and now they are increasingly relying on income from overseas students. This could be a hazardous strategy," he said.

"The global financial crisis could dry up demand from Asia … leaving the university with a gaping hole in its finances."

Meanwhile, the fallout from the University of NSW's closure of its Singapore campus continued to dog its management last year.

The Auditor-General disclosed the university had to pay an extra $3.8 million on its existing grant and loan repayments to the Singapore Economic Development Board because it failed to take precautions against a fall in the Australian dollar.

The university had earlier reached an agreement with the Singapore authorities to repay about $29 million in loans and $13.8 million in grants.

This followed the campus closing, with 148 students left in the lurch, just 10 weeks after it opened in early 2007 .