University’s endowment fund on the upswing

Last fiscal year’s return ranks higher than most other public universities across the country.

by Christopher Aadland

Investments made several years ago by the University of Minnesota’s Office of Investments and Banking are beginning to bear fruit, thanks to a healthier stock market.

The University’s Consolidated Endowment Fund saw returns of a little more than 20 percent on investments last fiscal year, which surpassed many similar-sized public higher education institutions’ endowments.

The nearly $1.3 billion endowment managed by the OIB helps fund scholarships, financial aid, University projects and faculty research, University Chief Investment Officer Stuart Mason said.

Endowment investment performance is a vital component in financing the future of colleges and universities, according to a 2013 survey released by the National Association of College and University Business Officers and the Commonfund Institute.

The survey noted participating institutions reported that their endowments fund about 9 percent of their schools’ operating budgets.

Last fiscal year’s return at the University translates to about $48 million, Mason said.

The endowment’s returns topped the nation’s public schools for fiscal year 2014, with the University of California following in second, according to a Sept. 16 Bloomberg News report.

The endowment fund has rebounded over the last few years after losing a good sum of money during fiscal years 2008 and 2009, Mason said. In FY 2010, the endowment bounced back a little and made money but didn’t beat the benchmark.

The University of Minnesota Foundation, which manages a nearly $2 billion endowment of financial gifts to the University, has also seen increased returns since 2008, according to quarterly reports.

The University tries to minimize potential losses by diversifying its investments, Mason said.

“Our goal is to be diversified so we can afford to take some losses,” he said.

The Board of Regents sets targets on how it would like to see investments allocated, Mason said, adding that a large portion of the investments go toward “pretty plain vanilla” stocks and treasury securities.

The rest is divided throughout the world, Mason said, like real estate, private equity, venture capital, high-yield debt and hedge funds.

This year’s high returns weren’t because of a shift in investment strategy, Mason said, adding that their investments always focus on long-term gain.

“Our strategy includes making investments where you don’t know what the results will be for several years,” Mason said.

For example, venture capital investments in technology companies were the biggest contributor last year, he said.

“Many of them went public or were bought by the big tech companies,” Mason said.

Mason said the successful year was a high for the University, but he is most encouraged by the impact it will have on long-term returns.

“While it is very nice to have a good year, we feel a lot better about the fact that our ten-year return number is above the benchmark,” Mason said.