U’s savings defy trend

Jamie VanGeest

While educational endowment returns are growing nationwide, things aren’t as good as they used to be for higher education institutions.

But the University’s endowment returns have improved.

In 2005, educational endowments earned an average of 9.3 percent nationally, but in 2004, they earned an average of 15.1 percent, according to the National Association of College and Business Officers.

The organization also came out with a list of the market value of endowment assets and the percent change between 2004 and 2005. The list includes 746 colleges and universities.

At the top is Harvard with the largest endowment. Harvard also boasts a 15 percent increase in its endowment funds between 2004 and 2005.

The University of Minnesota and its related foundations ranked 25th with a change of 13.8 percent. Other Minnesota schools, such as Carleton College, Macalester College and the University of St. Thomas ranked at 97, 100 and 174, respectively.

Educational endowments at the University are showing higher returns than in the past.

“We would define risks as investments that go up and down widely that we have little way to predict; that defines public stocks perfectly,” said Stuart Mason, the University’s chief investment officer.

Eighty percent to 85 percent of the University’s endowments used to be in public stocks; now that number is closer to half, he said.

Mason said a majority of small and large universities had most of their investments in public stocks a decade ago. Now many are diversifying their portfolios and putting more of their investments in private stocks.

“Our goal is to stabilize those returns and stabilize the endowment portfolio,” said Chris Suedbeck, the Office of Asset Management assistant director.

The University is gradually transitioning money into private stocks while trying to diversify its portfolio, he said.

Mason said he wants the portfolio to be an “all-weather portfolio.”

Mason said the University has a goal of growing about 10 percent every year. The endowment pays out 5 percent to academic departments, 0.5 percent for staff members and 1 percent for growth. Three and one-half percent is added for inflation.

One of the University’s new investments is timber, which grows steady at 6 percent a year, he said.

Also, Mason said the University is investing in private real estate and set a goal of returning 10 percent to 12 percent a year. But in the past few years, returns have been closer to 14 percent.

The University makes money off private real estate by fixing up the properties and because the value increases with inflation every year, he said.

One of the reasons Harvard will have endowment returns in the billions is because prestigious schools have more money. They also have staffs of 100 or more to handle the money, Mason said.

For example, Stanford had $18 billion in endowments in 2005, which produced a return of 18 percent. Last year, the University had $800 million and $150 million in returns.

The amount of the University’s endowment money is large, but the University has only three staff members that handle endowment money.

Meanwhile, the University has watched to see what successful schools are doing right.

“We’ve studied the performance of schools like Stanford and Princeton,” said Vitali Datsenko, a senior financial analyst.

Although there are just three full-time staff members, dozens of people are involved with making endowment investment decisions at the University. This includes staff members and outside advisers, some that volunteer and some the University pays.

With the recent upswing in endowment investments, the University is looking to hire one more full-time staff member.