At the end of the 2009 fiscal year, Goodhue said, the UMass foundation’s endowment had lost 15.5 percent of its value, but by the end of the 2010 fiscal year, which came on this past June 30, the endowment had grown 12.35 percent.
In absolute terms, the endowment grew from $367 million to $460 million. As of September 30, he said, the endowment stands at $480 million.
According to the 2009 Annual Report, the endowment declined from $407.1 million to $375.4 million between 2008 and 2009.
Those numbers are right in line with a survey released earlier this year by the National Association of College and University Business Officers, according to The Chronicle of Higher Education. The survey revealed that, on average, endowments had grown by 12.6 percent across the country after declining an average 18.7 percent in 2009.
Goodhue said that the foundation keeps a diversified portfolio for the endowment, which overseen by the Investment Committee, a group of alumni in the financial services industry who volunteer for the foundation. He said that they don’t make direct investments, but prefer to work with up to 30 different funds.
Goodhue said that 29.8 percent of the endowment is invested in equities. He also said that 20 percent of those are in US stocks while 9.5 percent are in international stocks and three percent of them are in emerging markets; 41.4 percent is invested in fixed income investments, mostly of investment grade, which means they are likely to meet their obligations and some US Treasury Department-issued bonds; 25 percent is invested in hedge funds and other alternative investments, while the remaining four percent is kept as cash.
“Giving has been very good,” Goodhue said. “We had our best fundraising year last year.”
UMass raised $131 million last year, including a $34 million anonymous gift to UMass. He said that the foundation’s goal this year is to raise $100 million and they’ve already gotten $33 million. Goodhue said that was good for the first quarter, which is usually the slowest.
“One of our most important functions is to fulfill donors’ wishes,” Goodhue said. “Alumni giving is comparable to other state universities.”
Because of their obligation to donors – Goodhue said that the endowment is kept in 1500 accounts – the foundation shies away from high-risk investments. It’s the foundation’s duty to maintain the value of gifts, so that an annually-given scholarship has the same value decades down the road as it had when it was first given. “We’re inherently somewhat conservative,” Goodhue said. “But we’re always trying to grow it a bit.”
He said that most endowments followed a conservative investment strategy, although larger ones, like Harvard and Yale, can afford to take more risks and make direct investments. For the most part, he said, UMass doesn’t invest in commodities, although it does own some gold through a fund.
Funding from the endowment for each campus is done using a spending formula, devised by the Investment Committee. Goodhue said that they try to contribute four percent of the year’s returns to funding the school. In a typical year they have a return of between seven and nine percent: four percent goes to the schools, one percent goes to the foundation as a management fee and the rest is put back into the endowment.
He said that the spending formula contains breaks which halt spending when the endowment gets below a certain level. There’s an absolute break, where all spending is cut off, at 93 percent.
“We try to do our best so we can fund as many programs for the students we can,” Goodhue, who has two sons at UMass Amherst, said. “It’s great we have alumni who contribute.”
Matthew M. Robare can be reached at [email protected].
