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University collective investments hold steady

Like other organizations invested in the stock market, U-M suffered losses in its endowment fund for the year ending June 30. But the decreases largely were offset by gains in other investment areas, leaving the University with $5.2 billion in assets for 2002.

The University's endowment fund dropped for the first time in 20 years, from $3.6 in 2001 to $3.4 billion last year. The loss follows a 10-year cycle of robust growth, during which the fund increased dramatically from $600 million in 1992, says interim Chief Financial Officer Timothy Slottow.

"The generosity of alumni and friends of the University, combined with a decade-long favorable investment environment, have helped U-M build the 12th largest endowment among institutions of higher learning and the fourth largest among public universities," Slottow says.
Chart courtesy of University Investment Office

The endowment fund is part of a long-term portfolio (LTP), which also includes a portion of the University's working capital and reserves (for various construction and other designated purposes), reserves from its Veritas insurance company and a portion of the newly created Gift Annuity program. The LTP is invested primarily in a diversified set of equity and equity-like investments, with a goal of getting a maximum return.

The Veritas insurance company, a wholly owned subsidiary located in Vermont, saw a 3 percent return on investment, ending the year at $152 million. The University Investment Pool, which includes working capital for various construction and other campus projects, had a return of more than 9 percent, finishing the year at $1.54 billion. M-CARE, the University-owned health maintenance organization, gained 2 percent to end at $135 million.

Slottow’s investment report to the Board of Regents Oct. 17 included a cautionary statement about the year ahead: “As we enter this coming year amid deteriorating economic conditions and increased global tensions, we need to continue to balance the focus on risk with the opportunity to maximize long-term returns.”

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