LSAClassOf2000

November 12th, 2012 at 2:32 PM ^

In reality, there are something like 7,600 separate endowments between the various campuses (Ann Arbor and throughout the state) as well as UMHS which are part of the $7.8 billion total. Here's the comprehensive Q&A on the University's endowment fund. That being said, it's well over double what it was a decade ago.

JHendo

November 12th, 2012 at 2:58 PM ^

Yes.  Flint has a 2011 endowment of 79.1 million and Dearborn has one of 30.2 million.  Both of which combined probably doesn't even touch just the interest made off of U of M's endowment, but I'd have imagine those are still nice figures nonetheless for schools of their size and short existence.

Edit:  Should probably scroll down and look at the already posted replies before I comment.  I apologize for my redundancy.

Bluesnu

November 12th, 2012 at 2:20 PM ^

It depends on how you define "performed better".  IIRC, Michigan's didn't lose as much both numerically and proportionately.  However, becaue of it's large size, not only does Harvard's endownment hve a greater opportunity for loss, but it also has the ability for greater investment in divergent areas which may have a higher risk/return.  

Speaking generally, just about all major endowments took a huge hit during the downturn.  The two notable performers during that time to my knowledge were Texas and ND. 

justingoblue

November 12th, 2012 at 4:22 PM ^

but I believe what he's saying is that if Harvard and Michigan can both afford to put x% of their assets into high risk/high return investments, Harvard is much more likely to hit on more of those, because x% of Harvard's endowment is significantly bigger than x% of Michigan's.

This might be reducing the issue ad absurdum, but my first thought was about spending $100 betting longshots at the track compared to spending $1000 doing the same; you have the opportunity to lose more, but you also have more chances to hit a winner.

BeantownWolverine

November 12th, 2012 at 5:06 PM ^

 

Fund management industry uses percentage points rather than absolute amounts for performance comparison. When they say "Harvard got hit hard during the recent financial crisis," that means their loss in percentage points is large, not the absolute amount itself.

I was asking because of Bluesnu's comments on "greater investment in divergent areas which may have a higher risk/return," which sounds counter-intuitive to me. That's the opposite of modern portfolio theories, I believe.

bronxblue

November 12th, 2012 at 4:50 PM ^

If memory servces me right, UM protected itself somewhat from the downturn because it had diversified their endowment because the state had been reducing its payment to the University due to budget issues.  So while other schools had not really contemplated a market downturn, UM had been forced in a round-about way to identify and maximize alternative revenue streams. 

gopoohgo

November 12th, 2012 at 8:36 PM ^

Lost 28% of the total value of their endowment.  The current endowment level $32 billion, the pre-crash peak was $38 billion.

Harvard was a pioneer in using alternative investments (real-estate, credit derivitives, etc) to boost the returns of their fund.  It bit them, like it did a lot of large finanial entities leveraged to magnify returns, with investments in illiquid assets.  

Apparently there was a lot of rebalancing in Harvard (and most endowment portfolios) after the crisis and their investments have bounced back.

http://www.fa-mag.com/fa-news/9786-risk-bites-back-lessons-learned-from-the-harvard-endowment.html

 

MAgoBLUE

November 12th, 2012 at 2:36 PM ^

 

I was watching the ND/BC game with my domer friend on Saturday and he was claiming that ND's endowment was #4 in the nation and Michigan's wasn't even in the top 10.  I don't know where he got his data from but I just wish he wasn't such a liar.

Personally, my livelihood here in Cambridge is dependent in no small part on the health of the MIT and Harvard endowments.  It's good to see they are still roughly equivalent to the GDP of a mid-sized country.

Mulvaskills

November 12th, 2012 at 4:02 PM ^

 

Endowments themselves are peculiar in that they really only exist to be large sums of money, which brings prestige to the University by virtue of the committments (faculty, facilities, etc.) the University can make due to the size of the endowment.  In reality, the endowment isn't used for any of those things but rather is invested in for-profit enterprises (PE Firms, mututal funds, hedge funds, etc.) while not paying taxes on its profits (whole other issue, IMO).  The groups that benefit from the endowment are the individuals in charge of the money, which at UM is the Regents (I believe), the investment office at the school and the various private, for-profit, investment firms that invest the money on their behalf.  If the school wants to build a building or fund a program, rather than use the endowment, it sells the name to a wealthy donor.  See the Ross School of Business.  At Harvard they can't build enough to satisy naming demands of alumni and non-alumni alike.  The point is, the size of the endowment doesn't really benefit the students, faculty or alumni (except in the instance you happen to be one of the investment professionals investing the endowment or are involved in raising the money) other than the ability to brag about it on a message board (no offense).  Though, that brag itself is akin to boasting about the number of core plus office building or bio-tech investments made in the past quarter.  PROTIP: If you are thinking about donating to the endowment fund, consider instead a program, club or other specific donation.

highestman

November 12th, 2012 at 9:51 PM ^

Actually, I audit 2 of the schools on this list.  He's pretty accurate.  An "endowed" chair position can mean a lot of things. The money doesn't go to nothing. its kinda complicated to determine where earnings actually go.  At the end of the day, a lot of the money is caught up in alternate investments that each school's investment office likes to tout as beating the market

Mulvaskills

November 13th, 2012 at 11:05 AM ^

What do you mean when you write the "professor isn't required to bring in money to pay their salary"? Do you mean the university isn't using tuition to pay that salary? Either way, I'm a bit prone to hyperbole and yes, a university's endowment is in part used for faculty, staff and alumni in ways like you mentioned. My point is that the amount of money spent in those ways is far and away eclipsed by the amount spent on investments. Perhaps more is spent on investment advisors and fund raisers even. I just don't see the educational value of having a university be one of the larger private equity funds in America. I don't have the stats off hand but it wouldn't surprise me if Harvard had a bigger fund than the Carlyle Group. Actually, they're probably investors in the Carlyle Group, so maybe not a good example. To top it all off, they don't pay taxes on their earnings, which makes no sense to me. In fact, i think someone could get elected to Congress in NE running on some endowment fund tax reform platform.

MMB 82

November 12th, 2012 at 4:11 PM ^

is they claim to be making on the order of 9% yearly on their investments despite the economy and current interest rates (if I can find the link again, I will provide it). If I could be sure I made 9% yearly, I would retire today.

maizeonblueaction

November 13th, 2012 at 10:53 AM ^

than I am can tell me why this is a terrible idea, but I think I have seen other universities do this; why couldn't the university set itself up as kind of an investment firm then (besides legal reasons), where people could invest their money with the university, get some kind of high fixed return on it, and the university keeps the rest to add to their endowment. If they get about 9% return per year, they could offer somewhere around 3% return on investment, still beat any commercial enterprise, and keep anything above and beyond for their own personal stash. Win-win.