University collective investments hold steady
By Laurel Thomas Gnagey
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.
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| 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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