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This report provides information on how the University of Minnesota Foundation (UMF) endowment is managed and invested, as well as an update on investment performance as of Dec. 31, 2013. Please keep in mind when reviewing this information that the volatility in markets today increases the possibility of change from quarter to quarter.
Managing the UMF endowment and payout to University programs
The Foundation manages the investment and spending policy of its endowment to protect the purchasing power over the long term to ensure that designated programs receive predictable and stable funding. Our primary focus is on stewarding donors' gifts to provide the maximum possible benefit to University programs in accordance with donors' wishes.
Donors may designate an endowment gift to create a new fund or contribute to an existing fund. These funds are held in perpetuity by UMF and are invested with other funds that comprise the UMF endowment to promote growth over the long term and protect against inflation. A portion of each fund's value—currently 4.5 percent of a five-year trailing average—is made available each year to support the designated program.
Investing the UMF endowment
The UMF endowment is invested by the University of Minnesota Foundation Investment Advisors (UMFIA), a non-profit subsidiary established in 1998 to focus on long-term investment goals. UMFIA has a portfolio of wide-ranging, highly diverse asset classes across geography, markets, types of securities, and styles of investment management, designed to balance higher-returning investments with those expected to yield a more stable return.
for the periods ending Dec. 31. Total value of UMF endowment: $1,835,000,000
*The market benchmark is a weighted blend of stock and bond indices that provides an objective comparison of results relative to the capital markets and peers. Currently, it is a blend of 65% stocks (U.S. and International) and 35% U.S. bonds.
**The Foundation’s investment goal is to achieve an annualized return of five percentage points in excess of inflation.
Value of UMF endowment over time
The UMF endowment has performed well over the long term, making it possible for well-established funds to provide predictable and stable funding to designated programs. The investment goal is to achieve an annualized return of five percentage points in excess of inflation, thereby providing designated programs with a revenue source that keeps pace with inflation. The chart below shows the growth of the endowment, compared with the Foundation's goal and the performance of the market benchmark, illustrated as the growth of $1.
Growth of $1 in UMF endowment since July 1, 1990
Global Equity includes publicly-traded common stocks of U.S. and foreign companies, including emerging markets. The net exposure of equity index futures are also included.
Marketable Alternatives contains investment firms hired to pursue a wide variety of value-added strategies often involving hedging and the use of leverage. Although many managers in this category trade instruments similar to traditional Equity and Bond managers, they differ from those managers in the complexity, concentration and sensitivity of their holdings to market movements. Returns from managers in this category are generally more a function of manager savvy.
Real Assets include investments in real estate, timberland, oil and gas reserves, and inflation-linked bonds. Real assets represent claims on future streams of inflation-sensitive income, supplying protection against unanticipated inflation and diversifying the portfolio.
Bonds & Cash generate stable flows of income, providing greater certainty of nominal cash flow. UMF invests primarily in U.S. government securities which provide a hedge against financial accidents or periods of unanticipated deflation.
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