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Posted on Tue, Mar 26, 2013 : 5:58 a.m.

10 things you should know about University of Michigan's multibillion dollar endowment

By Kellie Woodhouse

The University of Michigan has one of the largest college endowments in the country and it's often academically-ranked as a top public university.

U-M's chief investment officer Erik Lundberg says it's no coincidence that the school performs well both financially and academically.

"It helps to have an endowment to do [academic] things and do them excellently," said Lundberg, a 14-year veteran of the university. "If you look at the highest ranking universities they all have big endowments. I think there's a relationship there."

Lundberg visited U-M's faculty senate advisory committee on university affairs Monday afternoon to talk about the endowment. He explained, in general terms, the workings of U-M's investment office at the corner of Huron and Main streets in Ann Arbor and tried to lift the veil on an endowment that, in fiscal 2011-12, was valued at $7.7 billion.

Here's 10 things you should know about U-M's growing endowment:


University of Michigan has a $7.7 billion endowment.

Melanie Maxwell I

1) The endowment is on track to reach at least $8 billion when this fiscal year wraps up on June 30, according to Lundberg. At the close of last fiscal year the endowment was $7.7 billion, down from $7.8 billion in fiscal 2010-11.

2) The endowment has grown significantly during the past 25 years. In 1988, the endowment totaled about $300 million. By 1994 it was $1 billion, in 2000 it was $3.5 billion and in 2005 it was $4.9 billion.

3) In 2012, the endowment was ranked the seventh-largest of any university in the country and second-largest among public universities. In 1999 the university's endowment was ranked 17th-largest among universities and in 1991 the endowment was ranked 27th. The University of Texas system is the only public institution that has a larger endowment than U-M.

4) The endowment is made up of approximately 7,600 separate funds managed, as Lundberg puts it, "like a big mutual fund."

"They all pool together in one vehicle," he said. "Everybody gets exposure to the same investment."

Many of the funds have been earmarked for specific uses by donors. Examples include program support —the school's philosophy library operates through an endowed fund gifted by a donor— scholarships and professorships.


Erik Lundberg

Booth file photo

5) While the university is meticulous in how it invests its money, it's equally as disciplined in how it spends endowment returns.

"The point of having an endowment is not to grow it, it's to spend it," Lundberg said Monday.

Endowment distributions are capped at 4.5 percent of the endowment value, averaged over a seven-year period. In 2012 the university distributed $270 million from the endowment, up $4 million from the year before.

The university had been tapping into the endowment at a rate of 5 percent, but lowered that rate to 4.5 percent in 2010.

6) The endowment lost 0.5 percent of its value in 2012. The average investment return over the past five years has been 2.5 percent and over the past decade the return averaged 9.6 percent.

7) The university doesn't let social or political factors influence its investments.

"The regents have said the investments should be done based on the merit of return," Lundberg said. "We try to be blind to [social factors]."

At recent Board of Regents meetings, students and citizens have urged the university to stop investing in fossil fuels and HEI Hotels. Regents haven't publicly responded to the concerns.

Historically, interventions by regents have been limited. In the late 1970s regents disinvested in funds related to South Africa and in the early 2000s the board voted to disinvest in tobacco companies.

8) Donors are more generous when the endowment performs well. When Lundberg was recruited to the university in 1999, endowments returns had been lackluster and, for many years, were below their peer average. The effect, he said, was apparent among donors, who "weren't so excited" because many felt "they could do better on their own."

As the endowment performs well, donors feel comfortable that their gifts are well stewarded, Lundberg said.

9) The university's investment office was established in 1999 and now has a staff of 13 investors who oversee the school's financial assets and develop investment strategies, which focus heavily on longterm commitments and diversification.

"A lot of strategies take many years [to] pay off," Lundberg said Monday.

Separate from the investment office, the university has an investment accounting manager with a staff of about three people, according to Lundberg. They're tasked with keeping track of U-M investments and reporting their success to the school's chief financial officer, Timothy Slottow.

10) The school's endowment is placed in a mix of traditional and alternative investments. Here's a breakdown:

  • Natural resources: 9.3 percent
  • Real estate: 15 percent
  • Venture Capital: 11.5 percent
  • Private Equity: 15.4 percent
  • Cash: 2.8 percent
  • Absolute Return: 15.5 percent
  • Fixed Income: 8.6 percent
  • Non-U.S. Equity:12.7 percent
  • U.S. Equity: 9.2 percent

Correction: U-M does not plan to revert endowment distributions to 5 percent. Distributions will remain at 4.5 percent.

Kellie Woodhouse covers higher education for Reach her at or 734-623-4602 and follow her on twitter.



Fri, Mar 29, 2013 : 8:21 a.m.

I agree with Mr. Whitaker about the proposed 413 East Huron student housing project. There are way too many large, bulky buildings recently built near central campus and on East University that are graceless and destroy the skyline and block sunlight. The proposed 413 East Huron project would do the same, as well as irreparably damaging the large, beautiful trees in the area.


Wed, Mar 27, 2013 : 1:13 a.m.

Thank GOODNESS for blue85, who has been so kind as to respond to some of the most inane questions I can imagine---- and for having the patience to do so thoughtfully, thoroughly, and without snide remarks about the merit of the inquiry (which I can't seem to do myself).

G. Orwell

Wed, Mar 27, 2013 : 12:06 a.m.

Question. Is there a policy in place to turn students into debt slaves? Is that why tuition has risen at a far faster rate than inflation? What is driving 8-10% increase in tuition every year? Just wondering?


Tue, Mar 26, 2013 : 11:05 p.m.

11. Not one cent of this huge endowment goes towards the upkeep of Ann Arbor's roads, financing its civic works, or helping the local community via taxes.


Tue, Mar 26, 2013 : 10:46 p.m.

I think blue85 is my new hero. Silly silly people don't understand a thing about endowments, financials, politics, the University but that doesn't stop them from making accusations, claims, and getting all worked up. But our good ol' blue85 will put them in their place. But - thanks for the laughs everyone. I particularly liked the one where we got worked up about a building that they aren't even invested in because it shades trees and poor Ann Arborites. Ha... progress is the worst isn't it?


Tue, Mar 26, 2013 : 8:31 p.m.

Wouldn't it behoove the University to have a better Ann Arbor? Seams to be a wise investment to help with the roads and blight that our city leaders refuse to deal with. Pick up the phone Mayor H and ask for a low interest loan.


Tue, Mar 26, 2013 : 7:17 p.m.

Yes, how about a brake in tuition? Can't imagine all those professors are worth a paycheck.


Tue, Mar 26, 2013 : 8:33 p.m.

In the last capital campaign, endowment was set aside for over 2,000 partial scholarships (per annual report). Per recent talk concerning the next capital campaign, a significant focus will be placed on endowing funds for tuition relief, however, donors like to build and name things, so it will be a bit of a challenge to set aside funds for that purpose. However, Ms. Zell's recent donation which as I understand is all about funding tuition relief, is a magnificent counter-example...hopefully more such donations are pending.

G. Orwell

Tue, Mar 26, 2013 : 6:16 p.m.

#11. Endowment exists mainly to benefit the big banks. The goal is to run U of M like a business to maximize profits (increae tuitions, get large subsidies, and cut costs.) so the banks can receiving larger and larger endowments.

G. Orwell

Tue, Mar 26, 2013 : 11:52 p.m.

In my first comment which did not post,I did have "?" at the end of each of my sentences. What I do not get and do not approve of is, as U of M continues to increase it's endowments to astronomical levels, it continues to raise tuition. Putting tuition out of reach of the middle class, while asking for more state funding. Is it possible the U is compliant to the banks (that control the investment houses) that do not want to relinquish even $1 of the investment. Banks and investments houses are known to be very greedy. Look what they are doing in Cyprus. Outright theft of the public.


Tue, Mar 26, 2013 : 8:30 p.m.

At a fundamental level, you don't understand how either endowments or money management work: 1) the endowment yields a return which is spent for the benefit of the university and the students, faculty and staff; 2) banks play a very small role in the process but probably earn a sliver of the total return in the form of fees; 3) hedge funds and other money managers typically earn a 2/20 split or a 1/10 split: 2 percent of assets under management to defray infrastructure costs and 20 percent of profits above a high water mark and usually after a hurdle rate is exceeded, or the lower 1/10 levels based on the same logic; 4) from a controls perspective, university is run like a business, but by framework, design and tax code compliance, it is a not-for-profit; running it like a business on the controls and management side is not a sin, if anything, it allows more money to be directed away from administration and toward the entities main objectives of research and education; 5) the university's express goals are to lower tuition, and yes to cut costs, and yes to garner subsidies commensurate with its social goals; the furtherance of none of those objectives results in banks "receiving larger endowments"...the university receives endowment funds which the banks manage; thus you are wrong on almost every point.

Dog Guy

Tue, Mar 26, 2013 : 6:07 p.m.

Hiring Ann Arbor's mayor is one example of astute investment by U. of M.

Blue Dog Red

Tue, Mar 26, 2013 : 4:24 p.m.

There seems to be a stubborn resistance from some readers to understanding exactly what an endowment is for. Perhaps it is because the concept of saving money, creating a nest egg, living off the interest and not accumulating debt is going the way of the dinosaurs.


Tue, Mar 26, 2013 : 3:15 p.m.

The allegation that UM doesn't contribute anything is laughable. Ann Arbor Spark, the fire station on North Campus, the collaborations with police & AATA that make their operations better for all citizens, etc. You can argue that UM does pay ENOUGH, but if you start from the place that U-M pays NOTHING and contributes NOTHING, than the argument is invalid or it's some joke account trying to stir up trouble.

Retiree Newcomer

Tue, Mar 26, 2013 : 2:18 p.m.

How about an article that shows how the @$270 million annual distribution from the endowment fund is spent? This would be enlightening.


Tue, Mar 26, 2013 : 2:09 p.m.

This presentation tiptoes around the real nitty gritty. If transparency and accountability about spending decisions is important, then this presentation fails because no breakdown of the annual spending from endowment is given! Here's why it's important. With 27,000 undergrads, UM would have to spend $10,000 per student, or $270 million, annually, to reduce every undergrad's tuition. The stated goal here is to limit endowment annual spending at 5%. If the endowment is now $8 billion, that allows $400 million to be spent -- but only $270 m was spent this year. That leaves an extra $130m which could have been spent this year to defray tuition. Why was that not done? Moreover, exactly who decided, based on what standards, to spend on what items, with respect to this year's endowment spending of $270m? Or, stated another way, if the endowment has, since 1988, not doubled, or tripled, or quadrupled in size -- but expanded by a factor of THIRTY, why cannot the cost of tuition have been frozen during that time? I know the partial answer is that state funding has been slashed, but that's only a partial answer


Tue, Mar 26, 2013 : 3:50 p.m.

Blue85 has it exactly right on all accounts.


Tue, Mar 26, 2013 : 2:51 p.m.

Second thoughts: 1) "if the endowment has, since 1988, not doubled, or tripled, or quadrupled in size -- but expanded by a factor of THIRTY, why cannot the cost of tuition have been frozen during that time?" The endowment has grown by a factor of 30, but the budget at that time was $250MM and is now $6.1Bn for Ann Arbor alone, so the budget/size of the university has been growing as fast or faster than endowment. "I know the partial answer is that state funding has been slashed, but that's only a partial answer" It is more of an answer than you might guess. The state contributed roughly $1,300,000,000 to UM in the early 1960s. The current number is something like $300MM, so the state cut has been GIGANTIC relative to both the base and to the UM budget. That $1Bn/year has to come from somewhere. In part it comes from endowment and research growth (also criticized in these pages by naysayers) but when the flex is gone from other areas, tuition must go up or quality must go down. Consider the cumulative loss based on the above figures: 50 years of declining budgets from $1.3bn/year to the current level is a loss greater than $500MM/year on average over 50 years. In other words, UM has had to plug a $25,000,000,000 budget hole over those 50 years. It is astonishing that UM hasn't slid off the global map, yet the recent reputational survey places it 12th globally. Astonishing work by the UM administration and grossly misunderstood and underestimated by the folks in the Ann Arbor area who have the least excuse for their ignorance of the excellence of the institution.


Tue, Mar 26, 2013 : 2:44 p.m.

Your questions are reasonable but ignore several facts: 1) the spending rate is lower than that used in your calculation; 2) the calculation is based on something like a 7 year average dollar base; 3) if you look at the dollar base for those years (7,834,752.00 $6,564,144 $6,000,827 $7,571,904 $7,089,830 $5,652,262 $4,931,000) a very crude/unweighted average is around $6.38Bn, which would imply 4.5%*$6.38=$287, not your higher figure; 4) the whole endowment is not earmarked to reduce tuition which is insufficiently supported by the is used for a host of purposes: a) faculty retention; b) research; c) capital projects. However, by the substitution principle, every dollar spent in a non-tuition domain means more money CAN be spent to subsidize tuition. People complain about donor ego and naming buildings after them, but every such building built with donor money means part of the university mission is donor funded leaving other funds to pay for student attendance. Thus criticizing donor earmarks ignores the partial fungibility of the budget.


Tue, Mar 26, 2013 : 1:50 p.m.

So why can't they pay taxes or contribute something?


Tue, Mar 26, 2013 : 1:49 p.m.

Congratulations to Erik and the team for doing a terrific job managing the resources that will keep the University strong into the future. Taking 4.5% to 5% annually is exactly the right approach and gives the University a terrific, recurring, predictable source of funding. Well done!

Tom Whitaker

Tue, Mar 26, 2013 : 1:33 p.m.

11. The University's endowment has invested over $180 million in Greenfield Partners, LLC, of Connecticut, the developers of the controversial 413 E. Huron student housing project. $180 million is 2.3% of the total endowment and 15.6% of all the endowment's real estate holdings. The Regents may prefer to turn a blind eye to how endowment money is invested, but this latest high-rise student housing project is causing a great deal of distress in UM's own home town. Greenfield has disregarded city and community concerns and the recommendations of the Ann Arbor design review board. This will be the largest private building ever constructed in Ann Arbor and will damage the roots of landmark oak trees--some of the very trees that were part of the original "Ann's Arbor." It will cast Ann Arbor's most significant historic district into its shadow much of the year, including one property that is on the National Register of Historic Places. But it doesn't need to be this awful. Something better could be built here. I'm asking the Regents of The University of Michigan to please quietly contact Greenfield Partners and ask them to respect the city we all share, and to work with the community to design and build something we can all be proud of--not simply use our city as an investment instrument to be bought, sold and traded like some anonymous stock. Thank you.


Wed, Mar 27, 2013 : 2:44 a.m.

I couldn't agree with Tom Whitaker more! I hope that the Regents take to heart that he is asking them to intercede with Greenfield Partners to please consider building a building which will improve the standard of living for those of us who make Ann Arbor our home, and not just constuct a building that they can build (by right????), line their pockets, and walk away without any regard for the community. I will never invest in Greenfield Partners, no matter how successful their stock is!

Tom Whitaker

Tue, Mar 26, 2013 : 11:18 p.m.

Statistic: Ann Arbor has an average of 178 days of sunshine per year, which means we are "denied sunlight" 51.2% of the year, not 70%. Statistic: Dozens of citizens addressed the planning commission and city council regarding this project, only a few were in favor it (other than the developers and their lawyers). All the other speakers were strongly against it. Similar numbers are reflected in the correspondence from citizens to city council. Here's a link to the developer's own solar study. It is clear from this study that the properties to the north would be in the shadow of this proposed building for much of the day, October through April. (Make sure you're looking at the images on the right side of each page, marked "With Proposed Building.")


Tue, Mar 26, 2013 : 8:32 p.m.

Alice Ralph, really? This is Michigan. Ann Arborites are "denied sunlight" 70% of the year. I'd like to know how many Ann Arborites oppose and support this development. I'd really like to see how the community, not a few self-anointed spokespeople, views this development. To put it succinctly: statistics please.

Jeff Crockett

Tue, Mar 26, 2013 : 2:42 p.m.

Greenfield Partners has systematically ignored the concerns of the Ann Arbor community in its design of the 413 E. Huron building. In contrast, the University of Michigan provided a model of how to include community feedback into its design of the North Quad building. Greenfield Partners is an embarrassment to the University. Greenfield Partners would be well advised to adopt the University model of how to work in behalf of the interests of the community instead of against them.

Alice Ralph

Tue, Mar 26, 2013 : 2:06 p.m.

Not only does a building this size endanger signigicant trees, but also deprives human beings of sunlight. In the path of prevailing winds, such a building creates insufferable downward winds that render sidewalk nearly impassable--certainly undesirable. Set at "zero lot lines" there is no small patch for curbside seating, shade trees or other points of interest or grace. This very important interesection is historically askew and the visual impact of sheer walls jutting into view potentially decreases safety and increases congestion--not to mention vehicle drives and mid-block crosswalks. As TW says, it doesn't have to be this awful. It doesn't have to follow the bad example of the new "Varsity" construction across the street from this site. New construction does not have to net destruction of the assets of sustainability. UM and Ann Arbor could both be "leaders and best" or at least better than this.

Tom Whitaker

Tue, Mar 26, 2013 : 1:57 p.m.

Kellie, did UM or Greenfield provide you any physical proof of which funds UM is invested in? But I agree with ionic, it doesn't really matter. $180 million is a very significant chunk of money representing a healthy percentage of both entities total holdings. Money talks.


Tue, Mar 26, 2013 : 1:43 p.m.

it doesn't matter which specific fund; it all comes from or goes to the same deep pockets, and the connection should be made to bring attention to this threat to our city and its downtown neighborhoods. Greenfield should do their own internal investigation, and remove this project from their portfolio!

Kai Petainen

Tue, Mar 26, 2013 : 1:42 p.m.

Kellie, thanks for looking into it.

Kellie Woodhouse

Tue, Mar 26, 2013 : 1:36 p.m.

Thanks for sharing Tom. One thing to note: I did check on this and it appears U-M has invested in a different Greenfield fund from the one involved in the Huron development.


Tue, Mar 26, 2013 : 1:29 p.m.

Endowments are from DONATIONS to the University, not taxpayer funds. The State has no Control over them.

Lizzy Alfs

Tue, Mar 26, 2013 : 1:27 p.m.

I just learned 10 things, Kellie! #9: It seems like it'd be a fascinating job to oversee U-M's investment office. A couple weeks ago I read an interesting NY Times article about the college endowment drop:

Kellie Woodhouse

Tue, Mar 26, 2013 : 1:43 p.m.

The university's student newspaper the Michigan Daily did a fairly interesting profile on Lundberg back in 2009. You should check it out:


Tue, Mar 26, 2013 : 1:23 p.m.

I remember student protests in the 80s about divesting from South Africa. According to these articles, the UM regents only voted to divest funds in 1983, and they still had some investments in companies that did business with South Africa as late as 1988. Whose facts about when UM divested are correct?

Kellie Woodhouse

Tue, Mar 26, 2013 : 1:30 p.m.

It appears from these minutes ( that the process began, or at least was approved, in 1978...

Ren Farley

Tue, Mar 26, 2013 : 1:20 p.m.

How much discretion, if any, does the University have in spending endowment funds? Many of the monies, I assume, were given to the University for a specific purpose and, I assume, must be spent for that exact purpose? What share of the endowment income, in any, may be allocated by the Regents to any endeavor they judge worthy?


Tue, Mar 26, 2013 : 2:35 p.m.

The answer is that most of it is endowed by the donor, or earmarked and spent. The naysayers don't realize that what they see is what they get via donor intent. In other words, if a donor says "expendable" and mandates spending, the money is spent; if the donor says make it permanent endowment, it is endowed. This is mostly driven by legal mandate but the naysayers seem to suggest that UM break the law and vitiate donor mandate and intent. They should be assured that were UM to do this, donations would approach zero and they might be unlucky enough to get what they are wishing for...a more impoverished institution.


Tue, Mar 26, 2013 : 1:09 p.m.

good for UofM....bad part is that they except hundreds of millions in state funds each year while other schools are scraping by and making cuts.

Geoff Larcom

Tue, Mar 26, 2013 : 12:56 p.m.

It's also interesting to note that U-M took far less of a relative hit during the economic downturn because of its wise and nimble investment strategies. Erik Lundberg and his staff have played a huge role in the University's recent growth and success.


Tue, Mar 26, 2013 : 2:32 p.m.

Correct. I believe the UM returns have been at least in the top quartile. During the downturn the loss was around 21%, whereas the schools which were actually leveraged lost 30% or more. Lundberg has been worth his weight in gold.


Tue, Mar 26, 2013 : 12:19 p.m.

What is the purpose of the endowment at UM? It appears that it's there just to see how large a bundle of money it can accumulate. Hope the Michigan Legislature takes note, especially when UM comes crying for more funds from taxpayers.


Tue, Mar 26, 2013 : 2:31 p.m.

Here is my hope: for every $1,000,000 cut from the subsidy, UM admits 50 more out of state students to offset the cut. Those out of state students will offset the legislature's attempt to turn UM into a crummy community college. Fewer dollars subsidized should equate to fewer seats reserved for in-state students. The math is just that simple and I hope UM takes note of those state reductions in that fashion.


Tue, Mar 26, 2013 : 12:49 p.m.

Students graduate, succeed, and remember their good years at the UM. So they decide to provide a gift of money to be used for a personal a good cause. The funds can't be used for anything accept what the donor requests. For instance, a donor named scholarship fund for Engineering or LS&A students; an annual named prize award for a dissertation; a named fund source for UM staff facing emergency situations; a named fund for a brand new building... the list goes on and on. The UM, a public University (think of that!), has taken these generous gifts and made sure they will go on and on and on by investing the funds responsibly. This is all good!

Rabid Wolverine

Tue, Mar 26, 2013 : 12:34 p.m.

"Many of the funds have been earmarked for specific uses by donors. Examples include program support —the school's philosophy library operates through an endowed fund gifted by a donor— scholarships and professorships. " Perhaps you could read this section of the article again. I'll say this is probably true for most of the endowments. Specific uses for particular groups/labs/departments. Also, had you read the article it mentioned the endowment is not there to sit and make money but to be spent the the afore mentioned areas...


Tue, Mar 26, 2013 : 12:27 p.m.

The endowment enabled a $270M disbursement to the University last year. The State of Michigan gave an approximately equal amount to the University of $269M. The difference is that the size of the endowment enables this disbursement to recur given sound fiscal management; it's an altogether different proposition to rely year after year on the generosity of taxpayers and legislators for the same. Ken, ever read about those people who win the lottery and find themselves broke in 5 years? That's you. You cannot spend a windfall - it must be managed so that it throws off a reliable stream of cash, not spent willy-nilly because it's there.


Tue, Mar 26, 2013 : 12:08 p.m.

This is a fine article that points out another aspect of UM's fiscally responsibility. The fact that UM is so active in securing funding from private sources should have the naysayers rejoicing. With the recent reductions in state funding, it's either find new sources of income or reduce the educational services that this world-class institution provides. The Research Corridor (UM, MSU, & WSU) is an unparalled economic engine for all of the state of Michigan.


Tue, Mar 26, 2013 : 2:28 p.m.

Excellent point. As I note above: earnings which were spent out of endowment total $1,000,000,000 in the last five years alone. Those earnings, by substitution, replace lost state aid and by substitution help to partially offset the tuition increases which were driven by state reductions in aid. The naysayers just don't get it: the endowment is not a magic pot of beans that should be spent down to zero. Good stewardship suggests growing that stockpile in order to increase future income. The naysayers don't understand basic financial theory and one wonders what their 401Ks look like. A larger endowment for UM means: 1) lower tuition for students; 2) more funding for research; 3) defensive money to retain faculty (other articles note that UM faculty is routinely poached by elite institutions); 4) funding for capital expenditures approaching $500MM/year over the last decade when state contributions were roughly $25MM/year over that time span in order to prevent degradation of the physical plant. The naysayers seem to be speaking out of spite or else to explain that they are arguing against their own self-interest: more money earned by UM means less money spent by taxpayers...likewise a stronger UM reputation pulls money and talent into a state which has been shedding financial and intellectual capital like a dog shaking off water.

Kai Petainen

Tue, Mar 26, 2013 : 11:47 a.m.

This is a great article. My thoughts are mine alone and do not represent the University. "At recent Board of Regents meetings, students and citizens have urged the university to stop investing in fossil fuels and HEI Hotels" That is ridiculous and here's why: You would end up excluding all energy stocks as they are involved in fossil fuels in one way or another. For a diversified portfolio, you need to have some energy stocks, otherwise you might be taking on too much risk -- as you are excluding an important sector. Even if you try to exclude the energy stocks, you probably still hold them. So those who are complaining, if they hold any mutual funds, they probably have energy stocks. How? Well, index funds probably hold the energy stocks and if they hold any of those, well... they hold the very thing they complain about. If you exclude energy due to social responsibility, then start excluding other sectors. Exclude financial stocks as they had a socially unacceptable financial crisis. Exclude gold and materials as they dig stuff from the ground. Exclude utilities as they use raw materials and they are regulated/unregulated. Exclude Industrials as they pollute. Exclude telecom as they have cell phone towers. Discretionary for sweat shops. Staples for tobacco. Health care for high fees and political turmoil. Exclude Info tech for outsourcing. And then exclude every stock that has a high paying ceo and lousy returns to the shareholder. And then when you are finished excluding whatever stock you like.... and your fund gets lousy returns -- ask yourself this: did you do the socially responsible thing to the investor when you delivered lousy returns to them?

Kai Petainen

Wed, Mar 27, 2013 : 12:14 p.m.

Some of these same people never complain about 1,4 dioxane, a carcinogen, that is flowing and spreading under Ann Arbor. They don't protest against Pall's lack of transparency and clean-up efforts, or how a city well was put offline, or the lousy inaction by the MDEQ. Some of these same people never complained when oil/acid flowed and covered the Huron River and how the case remained unsolved -- and how those that were supposed to protect us -- MDEQ, City Hall, EPA, DNR, and the City Police ignored it. If you only look at the problems outside of the city and ignore the ones inside the city... it's a hypocrisy. You can make a bigger impact to your quality of life, if you get more involved and realize what is happening here in Ann Arbor.

Jay Thomas

Wed, Mar 27, 2013 : 5:43 a.m.

These same people should STOP USING fossil fuels. Lead by example already!


Wed, Mar 27, 2013 : 12:44 a.m.

Kai - Great post! Very well thought out and you obviously have a background in this. The could use you on the Financial side. :)


Tue, Mar 26, 2013 : 10:59 a.m.

The S & P 500 returned about 5.5% over the same past 5 years so, as usual, expert team of pro investors can't do better than the benchmark index.

Jay Thomas

Wed, Mar 27, 2013 : 5:42 a.m.

So 5.5% vs the 2.5% the UofM hired help generated over the 5 year period. That's pretty bad.


Tue, Mar 26, 2013 : 2:19 p.m.

You couldn't be more incorrect: over the 10 years the S&P has been down many years and university has been earning an average, compounded, of around 9.6%/year. The professional investors have absolutely destroyed the S&P returns. In the money management business, a excess bond return of 20bps or .2% is very significant and an excess equity return of 1% is very material. The university team has done far better in each allocation than the above. Their stewardship is why the endowment ranks in the top 10. If you want to see crummy returns, look, for example, at NYU...they have earned maybe $1Bn over the same period in which UM has earned $4Bn. Your assertion is dead wrong.


Tue, Mar 26, 2013 : 12:25 p.m.

If you think that throwing every dollar you have into the S&P 500 (essentially a 100% bet on US Equities) is "diversifying" oneself - especially in the context of a $7.7B portfolio - then you deserve everything you have coming to you.


Tue, Mar 26, 2013 : 10:54 a.m.

I just don't get it - with all of these billions, why is it that tuition continues to increase hurting many students who would love to come to UM but just cannot afford do to so. Frankly, I am very discouraged re: this article. It sound more like UM is a big corporation looking out only for those at the top.


Tue, Mar 26, 2013 : 2:16 p.m.

You are right, you don't get it; read the article: 1) endowment earns a return which is then spent; spending now means no future earnings; 2) in 1985 or so, the endowment was only about $250MM, and the earnings a paltry $13MM/year; the larger endowment means that the annual earnings and thus the annual distributions, are larger than that original endowment; 3) over the last 5 years the university has spent $1Bn from that substitution, that is money that would have either had to come from higher tuition or from the state, or from some other source...the larger the endowment the LOWER tuition will be; 4) endowments are legally restricted by the donor or spent in an operational year...when you see endowment grow it is generally because donations and income are growing but the money is entailed LEGALLY by donors to NOT be spent. Most of this was in the article. Why are you confused?


Tue, Mar 26, 2013 : 12:23 p.m.

The endowment distributed $270M in 2012. That's a significant sum of money - and approximately equal to the money given to the University by the State last year ($269M). Best of all, the endowment money is "renewable" - a stream of recurring returns means you don't have to go back to skinning taxpayers year after year for the money.


Tue, Mar 26, 2013 : 12:05 p.m.

The idea of an endowment is to invest and then use the returns. That's exactly what UM is doing. If it were to use this money to keep tuition increases down now, it would soon disappear, and tuition would go up twice as fast to cover the loss of endowment income.


Tue, Mar 26, 2013 : 10:42 a.m.

next time UM complains about a funding cut, they can shove it!! what a joke... And yet they cant kick in anything to pay for city services that they milk...


Wed, Mar 27, 2013 : 12:48 a.m.

The U does not use the endowment for day to day general fund operations. That is why they have cut the budget by over $300M in the last few years. The U uses the endowment for building renovation , scholarships, and investments in academic programs to strengthen the academic mission of the U. The endowment helps hire the top people in their fields of study to AA.

Bertha Venation

Tue, Mar 26, 2013 : 4:54 p.m.

Right on, Bcar! RIGHT ON!


Tue, Mar 26, 2013 : 3:03 p.m.

our property taxes are waaay too high for what we get. part of that is bec of the idiots in city hall wasting $ on "art," parking garages, new city hall, etc. and part is bec of the U owning much of the land =property taxes, yet they use many, MANY city services w/o paying...


Tue, Mar 26, 2013 : 2:11 p.m.

Should the University "kick in" to a municipality that practices such "OMG" financial numbskullery as this?

Dirty Mouth

Tue, Mar 26, 2013 : 1:24 p.m.

It would be nice to see a little more proactive activity from the University on Football saturdays. Just basic things, like, keeping the fans inline on the roads and in the bars.


Tue, Mar 26, 2013 : 12:44 p.m.

I think you miss the point of an endowment. It's goal is to invest and use the proceeds of the investments to fund the day to day goings of the big U. Without the Endowment, UofM would not have the annual money (270 million this year) to fund the plant and teaching operations.


Tue, Mar 26, 2013 : 12:36 p.m.

Yeah, but we live here and not in that parallel universe that you're talking about.


Tue, Mar 26, 2013 : 12:15 p.m.

Without UM, Ann Arbor would be the size of Manchester and you wouldn't have to worry about city services.