University of Michigan endowment dips to $7.7B in fiscal 2012
The overall value of University of Michigan's endowment dropped by $100 million in the last fiscal year.
On June 30 the endowment was valued at $7.7 billion, compared to $7.8 billion during the same time last year.
Meanwhile distributions from the endowment grew by $4 million. Distributions totaled $270 million in fiscal 2012, compared with $266 million in fiscal 2011. The $4 million increase marks the ninth year in a row that endowment distributions have risen.
Endowment distributions are capped at 4.5 percent of the endowment value, averaged over a seven-year period. The distributions support university programs, professorships and scholarships.
Investment returns for the endowment lowered. Returns during fiscal 2012 averaged -0.5 percent, lower than the 24.3 percent investment return reported the previous year. Officials cautioned that years of high rates of return are often followed by periods of low return.The ten-year return average is 9.6 percent.
Erik Lundberg, the university's chief investment officer, said he was disappointed with the year-end results, but not surprised.
"While an occasional loss from year to year is to be expected, the small loss last year is disappointing even though the endowment's investment return last year exceeded that of the average college and university endowment," said Lundberg.
Since 1999, the school's endowment has increased by $5.2 billion.
This article has been corrected to reflect that endowment returns were -0.5 percent in fiscal 2012. Kellie Woodhouse covers higher education for AnnArbor.com. Reach her at kelliewoodhouse@annarbor.com or 734-623-4602 and follow her on twitter.
Comments
BobbyJohn
Thu, Oct 25, 2012 : 7:18 p.m.
The fund had done well during the rough times by investing in alternative investments that aren't really open to private investors. Everything is cyclical, and some of those investments may not be doing as well.
Sue
Sun, Oct 21, 2012 : 12:04 a.m.
I know how they can fix this, cut Sue Coleman's wages and fringe benefits down to the national average for university presidents, that alone should make up the difference.
Honest Abe
Sat, Oct 20, 2012 : 5:47 a.m.
OH NO!!! What will they ever do???? I don't want to here anything, pertaining to UM and their money. They have PLENTY of it! PERIOD.
arborani
Sat, Oct 20, 2012 : 2:49 p.m.
My pet crocodile is weeping copiously.
Honest Abe
Sat, Oct 20, 2012 : 5:48 a.m.
*Hear**
Veracity
Sat, Oct 20, 2012 : 2:12 a.m.
Kea - Michigan's endowment fund earned -0.5% during the last year according to the article. The 9.6% that you quote represents the average annual return over the past ten years. However, I agree that the numbers do not appear to be correct. The -0.5% investment loss on $7.8 billion amounts to a loss of $39 million. Also $270 million was distributed out of the fund so the fund should have been down $309 million and valued at $7.491 billion. An additional $209 million was added to the fund during the year to account for the $7.7 billion balance at the end of fiscal 2012. Is the balance in error or were there $209 million of donations added to the fund that was not mentioned in the article?
Kellie Woodhouse
Fri, Oct 19, 2012 : 11:08 p.m.
Kea: Thanks for noting this. The investment return over the past decade has averaged 9.6 percent. This year it was -.5 percent. The text has been corrected.
Kai Petainen
Fri, Oct 19, 2012 : 9:58 p.m.
@Kea, I'm not speaking on behalf of the university, but of myself as a person living in ann arbor. The fund report is here: http://tinyurl.com/8vojhc6 I think there is a typo in the reporting. I think they meant to say, that the 10 year annualized return is 9.6% The 1 year return was -0.5% and that beat the median return of -1.0% at the other schools. Again, just my thoughts... 2011 was a very tough year for funds, as some major firms were struggling and they many firms had to close their funds.
Kai Petainen
Fri, Oct 19, 2012 : 11:23 p.m.
again... speaking as myself only, and not on behalf of the endowment. @Tesla.... it was a lousy year (June to June) for the stock market. You're looking at the wrong time period, and the market was not great during that time. The fiscal period goes from June to June. On June 30th, 2011, the Dow was at 12,414.34 On June 29th, 2012, the Dow was at 12,880.09 So the Dow went up 3.8% during that time. It sucked. I should note that the Dow is up 16% in the past year, so you are correct that it has been a good 1 year, but note the fiscal year that the endowment uses for their calculation. If you're up 8% in the past year, then the Dow has outperformed you by 8%.
Tesla
Fri, Oct 19, 2012 : 11:07 p.m.
How did they ( and apparently other schools) lose money in the stock market in the best year the stock markets had in five years? I'm worth peanuts and my portfolio is up 8 points and change.
Kea
Fri, Oct 19, 2012 : 9:35 p.m.
These numbers don't add up. If the endowment was 7.8 billion in June 2011, and the return was 9.6%, then the fund gained 750 million during the year. But it distributed only 270 million, so the endowment should have increased by 480 million.