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Sun May 3, 2015, 03:49 AM

How to Lose $1 Billion: Yeshiva University Blows Its Future on Loser Hedge Funds

Is this common, or just a particularly egregious example?


It was a time for emergency prayer. Rabbis at Yeshiva University were horrified at the idea that a non-rabbi was set to take over the presidency of a school that had been led by ordained clergy for more than a century. Joining many students at the college, they gathered on a brisk December day in 2002 to engage in a chant-and-response of Psalms, hoping to stave off disaster for their beloved school’s future.

What they couldn’t have known when that prayer session took place more than a decade ago was that the real danger in Yeshiva’s new leadership was not to the school’s spiritual welfare but to its very existence. Over the years to come, the new leadership at Yeshiva would ramp up risk in the school’s investment portfolio, vastly increase spending, and do little to insure against a rainy day.

When rainy days did arrive, with the global financial meltdown of 2008, Yeshiva was heavily exposed. Today, its finances are overwhelmed by a sea of red ink. According to a recent announcement by credit rating agency Moody’s, the school will run out of cash next year.

While Yeshiva has been making headlines for a sex-abuse scandal that had the school facing a $380 million lawsuit, a dramatic reversal of fortune undermining the organization from within has gone largely unnoticed. And when Yeshiva’s financial state has garnered attention from news outlets, the explanation has often been losses it sustained from its investments with convicted Ponzi scheme operator Bernard Madoff, estimated at $105 million.

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