University endowment bounces back for 2013

The University Foundation saw much higher returns this year.

University endowment bounces back for 2013

Roy Aker

Because of overall economic growth nationwide, the University of Minnesota Foundation saw a much larger return on its investments this year.

The foundation, which funds many scholarships, faculty and research programs, had an 11.7 percent return for fiscal year 2013, up from 1.6 percent in the previous fiscal year.

The foundation manages private gifts to the University, making sure they are invested to ensure growth and are spent how the donor intended. Its endowment now totals more than $1.4 billion. 

Douglas Gorence, president of the foundation’s investment advisers, said the University has a more diverse investment portfolio than the average school. Although universities with less diverse portfolios may see higher returns, more careful universities will invest in many areas, said William Jarvis, managing director of the Commonfund Institute.

The Commonfund Institute, a national firm that manages investments for nearly 1,500 institutions including the University, collaborated with the National Association of College and University Business Officers in a study that found international investments had the lowest returns in fiscal year 2012.

Institutions with endowments of more than $1 billion, which includes the University, saw an 11.2 percent loss on return for international investments last fiscal year.

International investments make up more than a quarter of all investments for the University foundation. As they declined in return value nationwide, they also fell at the University, which Jarvis said caused the lower overall returns in 2012.

Jarvis said universities that invested less internationally fared better than those that invested more.

The University of Iowa, which has a similar-sized endowment to the University, had a return of 12.5 percent for the 2013 fiscal year.

University of Iowa Foundation spokeswoman Dana Larson said Iowa had a higher return this year because of its significant international investments.

According its website, the University of Iowa aims for 56 percent international investments, more than twice that of the University of Minnesota.

University Foundation spokeswoman Martha Douglas said although returns fluctuate year over year, the foundation is more concerned with long-term returns.

The foundation has seen an overall 8.5 percent return in the last 20 years. Because the foundation’s investments are tied to the market, Douglas said, returns fluctuate each year.

Jarvis said each school has different reasons that it invests in different areas. He said the University seems to err “on the side of caution,” which can pay off over time.

“That approach may yield lower returns from year to year but can produce better results in the long run,” he said.

Douglas said the University has a more diverse portfolio in order to “protect the purchasing power of the gifts that people have made.”

“Our investment team balances risk of long-term investment really carefully,” she said.