The University of Michigan’s endowment climbed $529 million to a market value of $17.9 billion during the last fiscal year, with distributions at a record $470 million.
The portfolio’s performance was among the highest for the 25 largest college and university endowments, Chief Investment Officer Erik Lundberg said.
The university’s long-term investment portfolio has a 20-year annualized return of 9.9%. That performance is in the top quartile for endowments at higher education institutions and compares to the median 20-year annualized return of 7.6% among such institutions.
The 5.2% return during FY ’23, which ended June 30, comes two years after university endowments across the country experienced explosive growth, with gains at U-M topping 40%. The university’s long-term investment portfolio grew 2.2% in FY ’22.
The FY ’23 growth comes as the university continues to ramp up its investments in energy transition strategies, which includes $590 million in investments over the last three years.
“These investments continue to be a major contributor to the positive investment performance,” said Lundberg, who will share a detailed endowment presentation at the Board of Regents meeting Dec. 7.
“U-M has become an established leader in energy transition investments in higher education and is well on its way to transition the investment portfolio to net zero much sooner than the 2050 goal.”
U-M officials estimate the university could offset 25% of the endowment’s carbon footprint by the end of the current fiscal year and 50% by the end of FY ’25 from already identified investments, although methods for measuring the offset are still in development.
The endowment is a collection of more than 12,600 separate endowment funds, which provide support that is restricted in most cases for specific purposes, such as educational programs, research and professorships.
Endowment distributions of $470 million for FY ’23 supported a variety of university functions, from student scholarships to clinical care. The annual distributions — funds available for university units to spend — have increased each year since 2000 and totaled about $6.3 billion over that period.
On a per-student basis, U-M’s endowment is ranked 79th among all U.S. universities, according to a recent report from the National Association of College and University Business Officers. Unlike several private peer institutions that have similarly sized or larger endowments, U-M supports a much larger student body and campus community.
“Our healthy investment returns contribute hundreds of millions of dollars annually to support the university’s critical mission as a public research institution and health care provider,” said Geoffrey Chatas, executive vice president and chief financial officer.
“Our students, our patients, our employees and the taxpayers of Michigan reap the benefits of the continued strong performance.”