The University Record, October 11, 1999

U earned 13.4 percent on investment for fiscal year 1999

By Julie Peterson
News and Information Services

The University’s investment portfolios earned 13.4 percent for the fiscal year ending June 30, 1999, Executive Vice President and Chief Financial Officer Robert Kasdin announced Oct. 4.

That places the University’s investment performance in the top quartile of 150 college and university portfolios tracked by Cambridge Associates, a Boston-based investment adviser that specializes in higher education and other nonprofit institutions across the country.

“This excellent investment performance will allow our students, faculty and staff to enjoy some additional financial resources as they pursue the University’s mission of teaching, research and scholarship,” Kasdin said. “Although one should not count on this level of accomplishment every year,” he noted, “the U-M should claim its place at the forefront of university endowments. Our ability to attract L. Erik Lundberg, the University’s new chief investment officer, will further our efforts along these lines.”

As of June 30, the University’s endowment funds were valued at $2.5 billion. Endowment funds are given to the University by donors who have stipulated, as a condition of the gift, that the principal be maintained in perpetuity. Only the investment returns of the funds can be spent.

Those funds, along with money from the University Investment Pool (made up of working capital and designated funds) and certain smaller amounts from Veritas, the U-M’s self-funded insurance program, and M-Care HMO, a University-owned health maintenance organization, are invested in the long-term pool. The investment objective for the long-term pool, Kasdin said, is to maximize total returns over time while accepting a prudent amount of risk.

The University follows an endowment spending rule that allows 5 percent of the asset value of the endowment funds to be available for current operating needs. Any capital gains or income generated above that 5 percent are reinvested so that funds will be available in leaner times. “The discipline provided by the endowment spending rule is a cornerstone of the University’s prudent financial management,” Kasdin added.