Merrimack Valley

Merrimack College has $630,000 in embattled Wachovia account

By Bill Kirk
bkirk@eagletribune.com
Published: October 4, 2008

NORTH ANDOVER — Merrimack College has $630,000 tied up in an investment fund that is being liquidated by Wachovia Corp., the school said yesterday.

Kathleen Franzese, director of public relations and marketing at the school, said the money represents a small portion of its overall endowment and shouldn't affect the financial operation of the private college.

"Merrimack College has a short-term investment account with the Commonfund as part of our endowment investment portfolio," she said. "Fortunately, the balance is relatively small and represents less than 2 percent of the value of our endowment investment assets as of Sept. 30, 2008."

The school's endowment fund is worth about $32.5 million, she said, down from around $37 million last year. She said the endowment fund, like many others across the nation, has lost money due to the ongoing drop in the stock market.

Generally, she said, interest from the endowment fund is used to pay for scholarships.

Eventually, the school will be able to get its money out of the Wachovia account, she said. Wachovia has created a "staggered liquidity schedule," meaning that it is releasing money from the $9.3 billion fund slowly and distributing it in increments to investors.

Some 1,000 colleges and universities are invested in the fund.

"Despite the staggered liquidity schedule associated with the short-term fund going forward, it should not pose a cash flow problem for Merrimack College because of the amount of money involved," Franzese said.

Originally, Wachovia told investors they could only withdraw 10 percent of their money from the fund, but that figure was increased to 37 percent by Thursday.

The fund has been frozen and is being liquidated due to the ongoing turmoil in the financial markets, according to a letter written by Commonfund to its investors earlier this week.

"Credit markets have frozen, which has made trading of even the highest quality short-term financial assets impossible at virtually any reasonable price," the letter said.