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Updated 10:00 AM October 20, 2003



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Endowment rebounds, investments up overall in 2003

The University's endowment fund returned 5.4 percent last year and ended the fiscal year with a value close to $3.5 billion, Chief Investment Officer Erik Lundberg said in the annual report on investments presented Oct. 16 to the Board of Regents. Lundberg said a continuing strategy of "maximizing the total return with an appropriate level of risk" has contributed to the success of the University's long-term investments.

"Last year's performance showed again that financial markets will prove rewarding over time," Lundberg said.

One of the brightest spots in the report, Chief Financial Officer Timothy Slottow said, is that the endowment fund is on the upswing again after a one-year drop. Prior to last year's slight dip the University had experienced a nearly two-decade-long cycle of robust growth, during which the endowment increased dramatically from a market value of $200 million in 1992, Slottow said.

"This growth is a result of the generosity of our alumni and friends of the University, as well as last decade's extremely favorable investment environment," he said. Today Michigan's is the 13th-largest endowment in the country among institutions of higher learning and fourth-largest among public universities, Slottow said.

The endowment is part of the University's long-term portfolio, which also includes a portion of the reserves from its Veritas insurance company and a portion of the Gift Annuity program.

Regent David Brandon, chair of the Finance, Audit and Investment Committee of the board, praised Lundberg and members of the Investment Advisory Committee for outstanding results in both the short- and long-term performance of the endowment.

"Looking at the long-term portfolio performance over a five-year period of time, we are actually outperforming every benchmark in every class of assets, meaning we did better than the average investor," Brandon said.

The University's other large pools of investments also experienced positive performance last year, Lundberg said. However, Veritas, a wholly owned insurance company located in Vermont, saw just under a 1 percent drop in the value of its assets due to operational needs, as did M-CARE, the University-owned health maintenance organization. The University Investment Pool, which includes working capital for various construction and other campus projects, increased 4 percent to $1.6 billion.

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