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Unis learn some hard lessons about their money

The state's top universities are fighting to hold the line against course and research cuts after losing hundreds of millions of dollars in investments exposed to falling financial markets reports Malcolm Knox in the Sydney Morning Herald of 24 February 2009.

The universities of Sydney, NSW, Macquarie and Wollongong are among those whose finances have been dented by falls in income and declining asset values.

Sydney University's billion-dollar endowment fund lost $170 million in value last year, the director of investments and capital management, Greg Fernance, said.

The University of NSW's return on investment dropped by half to less than 5 per cent, while Macquarie, Newcastle, Wollongong and Western Sydney are preparing to announce falls in asset values totalling more than $100 million. The finances are being audited before being tabled in Parliament.

A report this week by Moody's Investors Service maintained the universities' AAA credit ratings but because of low debt they lost millions of dollars in interest income when rates fell by half last year.

Investment income for Sydney University, with the largest funds, fell $114 million from $146 million in 2007 to $32 million last year. Wollongong's investment income fell $20 million, a spokesman said.

Investment income is a fairly small proportion of universities' revenue, which is underpinned by government grants and student fees. Their financial viability is not threatened as it is for private universities in the US.

But teachers and students are starting to feel the effects. The president of the National Union of Students, David Barrow, said: "The funding gap left by government grants is still pretty huge and unless they close it we are going to see more and more impact on students. Student services are cut first, and already a number of universities have … cut funding from non-teaching/learning activities."

He said universities had been under pressure to generate income by making riskier investment decisions.

Paul Kniest, the policy and research co-ordinator for the academics' union, the Tertiary Education Union, said enterprise bargaining negotiations had been affected by the universities' saying their losses restricted funds for pay and other claims. "The ever-increasing reliance on private sources of income is making it increasingly difficult for universities to fulfil their core functions."

A spokeswoman for the University of NSW said: "There will be no adverse impact on students. In fact we are increasing our maintenance capital expenditure by $6.5 million to create new student study spaces, thanks to a one-off funding injection from the Better Universities Renewal Fund."

Mr Fernance said: "Investment income provides an important source of funding for the university and, during the boom years, was making a significant contribution to the funding of the campus infrastructure renewal program. The reduction in this source of revenue will therefore adversely impact on this area of activity as much-needed projects are deferred - or possibly cancelled."

Source: www.watoday.com.au/national/unis-learn-some-hard-lessons-about-their-money-20090225-8h5y.html