The University’s Strategic Investment Fund, or SIF, has survived a summer of criticism to become a working resource for the University: $26 million in grants were awarded this fall. Creating the fund was a significant accomplishment — an investment reserve of its size and nature is a rarity in higher education. At $2.3 billion, it is larger than all but about around 40 of the largest University endowments in the United States and Canada; the moneys were earned and sensibly assembled by the University’s crack investment team; and the funds are unrestricted — they can be spent wherever the University deems appropriate, meaning the University has as much as $100 million per year, every year for whatever is deemed worthy of investment. Needless to say, such a resource has the potential to be transformative.
At present, alas, it appears the strategic fund will be deployed in a manner that is… not very strategic, for the University has settled on an approach that consists of offering grants on an ad hoc basis, generally with a three-year time limit on the life of funded projects. This does not promise to effect lasting and permanent change. Why not? Consider the International Media Wall that appeared for several years in Alderman Library. It allowed members of the University community to watch international news channels and was, in my opinion, a tidy little resource. But I doubt it is well remembered, because it didn’t last long. Perhaps it was doomed by its location — some did not like the presence of televisions in the library. But what is certain is that it was established without a dedicated funding source: a grant, and not an endowment, created the media wall. And every University program without dedicated funding goes one of two ways: they either find a consistent source of revenue or they disappear.
There are good reasons to offer grants: they can “seed” projects with “start-up” funds, attracting other more permanent sources of funding in doing so, and grants can help launch nascent programs that require time to prove their viability. But the size and unrestricted nature of the SIF make it different: it furnishes a resource that can do what most endowments cannot — permanently fund selected programs at will.
The University should use the SIF to do precisely this — establish restricted and permanent endowments across the University. We should use the SIF for the endowment of endowments.
To my knowledge, no university in the world — not Harvard, not Penn, not Oxford, not Stanford — operates such a resource. So this approach would be innovative, and it has six advantages over the grant model of funding.
First, and as already mentioned, it would effect lasting change. The money would be earmarked, the spending guaranteed year-in, year-out, in perpetuity.
Second, this approach will attract better spending proposals, because academics and other members of the University community will relish the opportunity permanently to fix a place at Virginia for the work they value. The University will have to decide what is worth keeping forever, but the community will see this as a path to fulfilling the very mandate of the modern University — continually to develop the kinds of knowledge that need academia to thrive.
Third, more endowed professorships would bolster faculty recruiting. New professorships or clusters of such professorships would allow the University to attract the best academic talent available, and at $5 million each, the SIF could create up to 20 a year.
Fourth, endowments are more visible than grants. Thus, the SIF could, for example, endow a $100 million AccessUVa fund in a single year, and the University could name the endowment and/or its individual scholarships in honor of long serving University employees, generous University benefactors or members of the Board of Visitors. All such endowments could be “branded” as “SIF funded,” and a naming ceremony could become an annual event.
Fifth, the endowment model introduces an intermediate stage on the path to dispensing the moneys. Rather than cashing out $100 million per year, the same amount would be set aside and spent at the University’s regular endowment payout rate, currently 4.62 percent. Endowment money is thus a more fiscally conservative way to play, spending at 1/20th the rate of grants, and yet effecting more lasting change.
Finally, the SIF could be leveraged in fundraising, by matching large endowment gifts with strategic endowment funds, for example. And the significance of this tool for the upcoming Capital Campaign cannot be overstated: it was the absence of a second $100 million gift that delayed the completion of the previous one.
Indeed, the SIF’s $100 million annual payout matches not only the largest gift ever given to the University (which funded the creation of the Batten School), but also the sum the University once pondered borrowing to jump-start AccessUVa. This is a tremendous resource. Now that the University has completed the hard work of creating it, let’s think more strategically about how to spend it. Let’s stop dispensing grants and create endowments instead.
John Nemec is an associate professor in the Religious Studies department.
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