Stock market hits University endowment

With people worldwide losing an estimated average of 30 percent on investments in September, the University of MinnesotaâÄôs approximate $1.14 billion consolidated endowment fund might be in danger. The UniversityâÄôs Chief Investment Officer, Stuart Mason, said he expects the CEF to see the largest losses since September 2002, with stock losses expected to between 25 and 35 percent, he said. âÄúThe September ending quarter will not be good,âÄù he said, adding that exact third quarter numbers from July through September should be published next week. Mason said the first 10 days of October were among the worst in market history, and the fourth quarter might be more of the same. A comparable loss came in September 2002, Mason said, when the endowment lost 20 percent over the quarter. He said he does not expect this quarter to see such a large loss because of the diversification done since 2002. The CEF is currently split into five nearly equally parts to help prevent losses: international and domestic equity, fixed income, hard assets and private capital. Fixed income includes bonds; hard assets are comprised of real estate, timber and oil, and a debt manager is one example of private capital. Since the loss in September 2002, the CEF has increased from $480 million to the $1.14 billion reported in June, Mason said. From June 2005 to June 2006 alone, the endowment fund increased by over $298 million, an increase of more than 34 percent. Mason said the endowment money is spread among over 100 managers, and the asset management office determines how much each manager receives. âÄúI can assure you that all of our managers are struggling a little,âÄù he said. Investment is not gambling, he said, but the world is not acting in a sensible or predictable way. Each year, 4.5 percent of the earnings from the endowment are used to fund the appropriated gifts, including chair positions, professorships and scholarships. The percentage remains fixed year to year, but the actual amount received depends on how the endowment fairs in its investments. Richard Pfutzenreuter , chief financial officer, said gifts are not greatly affected from quarter-to-quarter losses because the earnings are paid out on a five-year moving average. âÄúWhile it is a dramatic fall in the endowment, we hope for and expect recovery over time,âÄù he said. Pfutzenreuter said this payout scheme helps prevent large market fluctuations from affecting gifts. By averaging every quarter from the past four years, people can budget how much they expect to receive from the endowment. âÄúWe invest our money for the long term,âÄù Pfutzenreuter said. âÄúWe have to remain with a long term view.âÄù