University’s endowment saw modest growth in FY ’22

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The University of Michigan’s long-term investment portfolio, which consists mostly of the endowment, grew 2.2% in the last fiscal year.

The portfolio’s performance was among the highest for universities with large endowments, with most reporting losses for the 2021-22 fiscal year, said Chief Investment Officer Erik Lundberg.

The average return for a college and university endowment was -6.5% last year, according to Cambridge Associates, an investment consulting firm that serves colleges, universities and large institutional investors.

The university’s endowment climbed $325 million during the FY ’22 to a market value of $17.3 billion as of June 30.

The university’s long-term investment portfolio has a 20-year annualized return of 9.9%. That performance compares to the median 20-year annualized return of 7.4% among college and university endowments.

The 2.2% return over the last fiscal year comes one year after university endowments across the country experienced explosive growth, with gains at U-M topping 40%.

“Our investments in renewable fuel and sustainable energy contributed significantly to the positive performance last year, along with other investments that responded well to inflation,” said Lundberg, who will share a detailed endowment presentation at the Board of Regents meeting Dec. 8.

The endowment is a collection of more than 12,400 separate endowment funds, which provide support that is restricted for specific purposes such as educational programs, research and professorships.

Endowment distributions of $434 million for the 2022 fiscal year that ended June 30 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 $5.9 billion over that period.

On a per-student basis, U-M’s endowment is ranked 86th 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.

“Thanks to exemplary management from Erik Lundberg and our investment team, our endowment continues to provide the University of Michigan with a reliable source of revenue for its operations,” said Geoffrey Chatas, executive vice president and chief financial officer. “We’re more than satisfied with the portfolio’s continued strong performance.

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