Endowments Are Below Average

By COLLEEN HUBER

The value of the University of Mary Washington Endowment, a fund generated by donations, rose nearly 18 percent in fiscal year 2011, but that trailed the average gain of 19.2 percent for all college and university endowments nationwide.

The UMW endowment is used to fund student scholarships and departmental programs.

Improving economic and market conditions has increased the wealth of endowments across the U.S. The National Association of College and University Business Owners (NACUBO) found an average endowment return of 19.2 percent for the fiscal year end on June 30, 2011, an increase from 11.9 percent the year before. The group studied educational endowment returns for 823 colleges and universities in the U.S.

The UMW Foundation, a non-profit corporation chartered by the Commonwealth of Virginia, reported investment returns below the average with a 17.7 percent for the 2011 fiscal year, according to Greg Branner, director of finance and administration at the UMW Foundation.

According to Branner, UMW’s endowment was below the average due to the still-fragile state of the economy and unstable investment markets. Mangham Associates, an investment firm that specializes in endowment management, has advised the Foundation to avoid market risk and instead invest in high-quality, low-debt companies, according to Branner.

The university’s endowment has increased over the past 20 years from $10.8 million to over $37.8 million.

Although UMW’s endowment was below average in 2011, it has outperformed its peer group, institutions with endowments valued between $25 million and $50 million, in six of the last eight years, according to Branner. Banner attributes this to the Foundation’s ability to manage risk while continuing growth of the foundation’s investment portfolio, partly by diversifying and adhering to what he considers strong investment principles.

UMW’s portfolio consists of assets invested in public equity, private equity, real assets, bonds and cash. Its statement of investment policy requires that all endowment assets are diversified within its asset class to enhance returns and reduce risk of decline, according to Branner.

The financial objectives of the foundation are to support current and future actions of UMW and support student scholarships and UMW academic programs, among other things, according to Banner.

Banner said that even though many of the contributions received for the endowment, there are donor restrictions.

Most funds are permanently endowed, invested and managed by the Foundation in perpetuity, per the donor’s restrictions, said Branner.

The endowment is long-range and grows over time. The actual amount that is donated cannot be touched, but money earned on that amount can be spent by the Foundation, according to Jeff Rountree, chief executive officer and the UMW Foundation president.

“You want to try and make more money than you are paying out,” said Rountree.

Twenty-nine percent of the total endowment as of June 30, 2012, $38 million, goes to departmental programs and faculty awards, according to Branner. These endowed programs are used within a department to fund a project or award, according to Rountree.

The other 71 percent of the endowment, over $27 million, goes to funding student scholarships.

All donations are reviewed by the University and the Foundation before being approved, according to Rountree.

There are rules to the terms and restrictions that a donation may carry. They must be legal and non-discriminatory, according to Rountree. There is no limit to the number of restrictions that a donation may have.

“The best thing for a University is the least-restricted, the better,” said Rountree.

According to Branner, donors sign terms of agreement that establish the criteria for restrictions and the UMW Advancement Office resolves questions regarding the interpretation of the terms of agreements and purpose of the donations.

Additionally, the Hyatt Place Hotel is on schedule for both construction and its eventual opening, according to Rountree.

Branner said the Foundation is waiting to hear from the City of Fredericksburg regarding when it can occupy the building before the foundation can announce an opening date.

Rountree said that he could not give a specific opening date, but that it will open in late October or early November 2013. The hotel will have a “slow” opening, in which the staff can become accustomed to their duties and to keep the problems to a minimum.

The foundation is also funding the building of the Campus Center, which will take the location of Chandler Hall. According to Rountree, it is still in the final design stage, but it is on schedule and construction will commence in the summer of 2013. He said it will take about two years to build.