Like other organizations invested in the stock market, U-M suffered losses in its endowment fund for the year ending June 30. But the decreases largely were offset by gains in other investment areas, leaving the University with $5.2 billion in assets for 2002.
The University’s endowment fund dropped for the first time in 20 years, from $3.6 in 2001 to $3.4 billion last year. The loss follows a 10-year cycle of robust growth, during which the fund increased dramatically from $600 million in 1992, says interim Chief Financial Officer Timothy Slottow.
“The generosity of alumni and friends of the University, combined with a decade-long favorable investment environment, have helped U-M build the 12th largest endowment among institutions of higher learning and the fourth largest among public universities,” Slottow says.
The endowment fund is part of a long-term portfolio (LTP), which also includes a portion of the University’s working capital and reserves (for various construction and other designated purposes), reserves from its Veritas insurance company and a portion of the newly created Gift Annuity program. The LTP is invested primarily in a diversified set of equity and equity-like investments, with a goal of getting a maximum return.
The Veritas insurance company, a wholly owned subsidiary located in Vermont, saw a 3 percent return on investment, ending the year at $152 million. The University Investment Pool, which includes working capital for various construction and other campus projects, had a return of more than 9 percent, finishing the year at $1.54 billion. M-CARE, the University-owned health maintenance organization, gained 2 percent to end at $135 million.
Slottow’s investment report to the Board of Regents Oct. 17 included a cautionary statement about the year ahead: “As we enter this coming year amid deteriorating economic conditions and increased global tensions, we need to continue to balance the focus on risk with the opportunity to maximize long-term returns.”
