USC makes $14.6 million off Google, YouTube merger

LOS ANGELES – The same Web site students visit to watch “The Evolution of Dance” and popular “Saturday Night Live” sketches just cashed out for the University of Southern California. \nThe university will receive $14.6 million for the 30,901 shares it held in YouTube, said USC treasurer Ruth Wernig, who confirmed the university owned those shares. \n“We had an investment in Sequoia (Capital), which invested in YouTube,” Wernig said. \nShe added the university has not yet received the money from the shares. \nSequoia Capital manages a venture capital fund that had invested in YouTube, according to The Associated Press. \nUSC invests in about 80 venture capital funds. The money to invest in these and other ventures comes from the university’s endowment, Wernig said. \nIt was not uncommon for universities to invest endowment money, said Lee Swartz, associate professor in the Marshall School of Business. \n“Most private universities have substantial amounts of investment to sustain themselves,” he said. “They are continually trying to invest more money.” \nWithout investments, the value of the endowment would decrease because of inflation rates. It would also be possible, however, for investments to fail and not have any returns. \nBut Swartz said universities are also careful about their investments. \n“Private universities have done a good job in the last decade to control risk,” he said. “They directly invest in things that go across a lot of different investment styles to diversify.” \nSwartz named mutual funds, hedge funds, direct investment and venture capital investments as some of the investment options open to universities in order to diversify their portfolios. \nWernig said that USC did diversify its investments to minimize risk. USC invested in venture capital funds and in fixed income investments, which are generally bonds that have a fixed interest rate. \nFixed income investments have a lower risk rate but a lower return rate compared to venture capital investments. \nWernig said the university invests both domestically and internationally. Because of confidentiality reasons, Wernig could not comment further on USC investment ventures, including the recent YouTube investments. \nIncreasing investment is essential to increasing the endowment of a university. \nFive percent of the endowment is spent every year, and the board of trustees votes on the percentage of the payout, Wernig said.