West Mountain Increases Short Position on For-Profit Educators as Industry Prospects Dim

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The for-profit education sector is expected to face further headwinds as needed legislation and a sputtering US economy take their toll on the industry.

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Think of the student loan industry as the next housing bubble

West Mountain, an Atlanta-based asset manager, announced today that it has increased its exposure to the short side of US for-profit education companies in its flagship investment vehicle. "Think of the student loan industry as the next housing bubble", says Paul Alar, Managing Director of West Mountain. "Government programs increase the ability to purchase an asset (a home/an education), driving the asset's price upward", he continues. "Soon, the market for the asset becomes super-saturated and it collapses due to lack of demand, leaving borrowers unable to repay loans. This, in the case of student loans, has been exacerbated by the sub-prime housing debacle and the resulting high unemployment rate".

The for-profit (as opposed to the not-for profit) education industry is expected to be hit hardest by the downturn because it is characterized by a high level of student drop-outs and strong competition. Further, for-profit schools enroll 13 percent of all college and university students, but they account for half of student loan defaults. They also accounted for a quarter of the $93 billion the federal government spent on student loans and Pell grants last year.

Legislators have taken notice of these statistics and new regulations are expected to make for-profits recruit students from a much smaller market and spend more capital to do so. Further, the looming specter of Federal debt reduction raises the strong possibility that Pell grant funding will be cut, likely causing a step-function change in demand for the industry.

About West Mountain, LLC

Based in Atlanta, GA, West Mountain, LLC pursues a global multi-advisor, multi-strategy approach to hedge fund investing. The company specializes in portfolio and capital protection and risk reduction. To learn more about West Mountain, LLC, please visit http://www.westmountainllc.com.

For additional information, contact Michael H. Pruner at (404) 885-5742 or mpruner(at)westmountain(dot)us.


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