University of Michigan Endowment Returns 13.8%

Long-term portfolio assets rise to $10.9 billion from $9.7 billion.

The University of Michigan’s long-term portfolio returned 13.8% for the fiscal year ending June 30, bringing the endowment’s total to $10.9 billion from $9.7 billion at the same time last year.

 The performance outpaced the 12.9% return from the broad universe of college and university endowments as measured by consulting firm Cambridge Associates, and represents a 15.2% swing from last year, when the portfolio lost 1.4%. The university’s long-term portfolio consists of mostly equity and equity-like investments such as alternative assets, both liquid and illiquid.

The university said the portfolio’s 20-year annualized return of 9.7% places it in the top 10% of long-term investment performance among university endowments. In fiscal year 2017, distributions to the general fund totaled $325 million, up from $304 million last year, and over the past 20 years, endowment distributions to the general fund have exceeded $4 billion.

Michigan’s investment performance ranks it in the upper end of the top quartile of all endowments for both the past five- and 10-year periods, as reported by Cambridge Associates.

Further details of the fund’s performance have not yet been disclosed.

Michigan’s endowment is a collection of more than 10,000 separate endowment funds that provide support for specific purposes such as scholarships, educational programs, or professorships. It annually distributes 4.5% of the endowment’s average market value calculated over the last seven years for operating purposes. The endowment said that basing the spending on a trailing average market value instead of the current market value allows the university to stabilize endowment distributions so operating budgets are insulated from the volatility in financial markets.

The endowment is the ninth-largest among all US universities, and third among public universities, according to data compiled by the National Association of College and University Business Officers and the Commonfund.

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