The volatile economy apparently has hit the University’s investments hard, as the University of Virginia Investment Management Company recently reported a negative 11-percent return on the University’s endowment for the quarter that ended in September.
“This ranks with only two previous years in the University’s history,” University spokesperson Carol Wood said, noting that in 1990, during the first Gulf War, the endowment reported a negative 10.2-percent return and during the stock market crash of 1987 it experienced a loss of 12.2 percent. According to the September UVIMCO report, the University’s endowment — which is used to support academic programs and financial aid as well as to manage day-to-day operations — is currently valued at $2.9 billion.
Wood explained that of the University’s total endowment, 28 percent is unrestricted and available for investment in current University programs. The Board of Visitors decides what fraction of the unrestricted general endowment can be used for this investment.
This year, Wood said, the Board of Visitors voted to increase the unrestricted general endowment payout from 4.5 percent to 5 percent, providing the University with an additional $16 million. The University’s deans will decide how this money will be spent.
Endowment losses have the potential to restrict growth and spending, but Wood said she nevertheless is fully optimistic about the University’s future.
“If you were to average out the returns over 20 years, it is a plus-14 percent,” she said. “That’s actually a very good action.”
Wood said one reason the University has had such success in endowment investment is that UVIMCO has always taken a more conservative, long-term view in its investment policies than many other institutions.
“In a time like this where there is so much volatility, we stay the course,” Wood said, noting that the University does not make any major changes in investments in such times of economic hardship.
The success of the University’s investment policy has proven that these long-term investments are in the University’s best interests, she said, noting that current declines are expected to be overcome eventually.
“The current stress in the financial markets may last several years, said Leonard Sandridge, executive vice president and chief operating officer. “However, the markets will strengthen over time, and we intend to be positioned to benefit.”
He also noted that the University has not yet had to sacrifice its service to students and faculty in light of the turbulent economic climate, nor does it intend to.
“Our intention is to manage well in the current situation and come out of this downturn as a stronger institution,” he said.
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