The University of California endowment has lost $1 billion over the last nine months, according to a report filed by the Board of Regents’ treasurer last week.
The university’s general endowment pool was $5.7 billion as of Sept. 30, a 15 percent decrease from $6.7 billion, the fund’s value in June 2007. Exposure to the current financial crisis remains the primary reason for the loss in value, according to UC spokesman Trey Davis.
“Investment returns are tied to the economic situation,” he said. “We have an economic meltdown across the globe.”
Although Davis said no specific effects of the loss can yet be determined, funding for scholarships, faculty and staff compensation, as well as various university programs, is provided in part by the endowment.
According to Davis, the university is a long-term investor and anticipates future returns in the stock market.
“Ups and downs in the market are expected by any investor, so you plan for long-term growth and keep a highly diversified portfolio,” he said.
Documentation provided by the Office of the Treasurer shows the endowment fund had stakes in several companies that were hit hard by the financial crisis.
Companies including Bear Stearns, Citigroup and Lehman Brothers made up a portion of the endowment holdings as of December 2007.
In a statement from the UC Treasurer’s annual report, UC Chief Investment Officer Marie N. Berggren said the financial crisis has significantly impacted the endowment.
“[The performance of the endowment] needs to be viewed in the context that the fiscal year ending June 2008 was the most turbulent since 2002,” Berggren said.
According to Davis, the Office of the Treasurer monitors its investments and strategies closely, and benchmarks for the endowment are designed to observe the performance of groups of investments in certain categories such as real estate.
Monthly meetings with the treasurer serve to evaluate performance of the individual investment categories and the general health of the endowment.
The UC Board of Regents sets the endowment payout rate — the rate at which funds are distributed — at 4.75 percent in May 2008. According to Davis, there are no plans to adjust this due to the long term nature by which the payouts are calculated.
Berggren highlighted the recent approval by the regents to allow for greater investment in companies abroad.
According to the treasurer’s report, reduced investment in the housing market and a desire to diversify the endowment portfolio drove the regents’ decision, which will be implemented over a two-year period.
In evaluating the performance of the endowment, Berggren said ongoing refinements of the various investments had a positive impact by reducing the amount by which the endowment fell, despite the negative turn in the global stock market.
As of June 2008, the UC San Diego Foundation — UCSD’s internally managed investment program — drew 75 percent of its funding, approximately $266 million, from the regents-managed General Endowment Pool.
