Forget name brand investment banking firms like J.P. Morgan and Goldman & Sachs. Throw away the stereotype that the best market players are on Wall Street. If you think that the only money handling in Charlottesville takes place at the Pavilion XI's cash register, think again.
In an office building three miles away from main grounds is a group of 15 people who manage the University's investment portfolio. Its name? The University of Virginia Investment Management Company. UVIMCO's job is to invest over $1.8 billion of endowments in the stock market in order to generate returns for the University.
Although students may watch the ticker tape roll by on the screen as they flip past CNBC, they probably never realize that these numbers apply to their own college's financial affairs. While University investment might seem risky, however, the organization has indeed consistently earned higher percentage returns than the average investor.
UVIMCO is a subcommittee of the Board of Visitor's Finance Committee- the group that handles University budgets and funds. According to its Web site, UVIMCO consistently is among "the five largest endowments of public institutions and the 30 largest of all colleges and universities in the nation. Equally important, the endowment per student consistently has ranked among the largest in the nation for a public university."
The typical financial packages that the investment group handles are called endowments, which come from private donations stipulated with spending restrictions. For example, Bridge Information Systems started an endowment in February when it gave $73 million to the McIntire School with specific directions to fund its state-of-the-art trading floor.
Endowment donations also are restricted in that the University can only spend the returns from investing endowment capital, not the capital itself. In this way, a well-managed endowment fund may benefit the University infinitely, as interest accrues and goes toward operating or improvement expenses. As Alice Handy, president of UVIMCO and treasurer to the University, stated, "endowments are here forever."
The financial gurus at UVIMCO do not settle for small returns, though. In the fiscal year 1999-2000, their return on venture capital investments, or investment in a new company, was a whopping 400 percent, up from a 10-year return of 44 percent beginning in 1988. While the dot-com investment craze left thousands in the red each week, UVIMCO's investments thrived.
Two venture capital investments, Foundry Networks and Akanai Technologies, made up a substantial portion of last year's proceeds. Foundry Networks, which UVIMCO sold at $124 per share last year, sold for only $12.5 per share just last week. Akanai Technologies went for $226 per share when UVIMCO sold it but is only $17.75 per share today.
UVIMCO staff "get their thrills by helping to fund improvements to the University and the lives of students," Handy said. Since she became the first investment officer in the University's history 26 years ago, Handy has worked to earn stellar returns. Yet, she predicts that such ideal circumstances "may never happen again." It may be decades before a $15-20 million investment ever will be able to yield a $400-500 million return again.
Tangible projects, such as building renovations, are not the only projects investment returns fund. Leonard W. Sandridge Jr., executive vice president of UVIMCO and the University's chief operating officer, said that a portion of the returns made by the organization constitute the University's financial aid. The amount the endowment returns earned last fiscal year were more than enough to fully fund the University's financial aid programs.
CLASS="article--image" BORDER="0"> Courtesy UVIMCO [ CLICK FOR FULL SIZE ]
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Today, UVIMCO has shifted its cash and some of the proceeds from its venture capital gains to hedge fund investment. Hedge funds protect against the risks from a market slump by diversifying investment strategies. The group now uses such asset allocation methods heavily, and about 35 percent of their funds are invested with a hedge-type strategy. As a result, UVIMCO has continued to maintain a positive portfolio in today's declining market. For example, the Maverick hedge fund is up 14.5 percent compared to a stock market that is down approximately 10 percent.
UVIMCO is not the only group at the University that plays the markets for returns, but it certainly is the largest. There are 20 similar foundations on Grounds including the Alumni Association, the Darden School Foundation and the Law School Foundation. These groups manage over $600 million themselves.
With its healthy growth, sizable returns and stable venture choices, UVIMCO boasts strong earnings even during a potential recession. Quietly working as the University's investment arm, the committee foots our bills and supports financial aid, working behind the scenes for students better than most private investors could ever do.
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