CU Foundation endowment outperforms benchmarks in good times and bad
Given the recent turmoil in world financial markets, you’d have to have nerves of steel to not feel a bit shaken by our unsteady economy. Like everyone else, the University of Colorado Foundation’s endowment has felt the impact of the downturn. Yet, it’s reassuring to know that our endowment’s performance has been appreciably better than the overall market and most other endowment portfolios. While the total endowment has declined, it has performed very well over the long term.
“Our endowment performance for 2008 is down 24.3 percent,” says Foundation CIO Chris Bittman. “Though very painful, this performance is fortunately not nearly as bad as the S&P 500, which lost 37.0 percent for the same period.”
Bittman says CU’s endowment has outperformed the U.S. stock market materially for the trailing 1, 3, 5, and 10 year periods, with less risk than the market for each time period. It has also outperformed 97 percent of its peer group for the last 5 years ending Dec. 31, 2008.
Another reason to take heart can be seen in the chart below. It illustrates how well CU’s Long Term Investment Portfolio (LTIP) performed in up and down markets.
*LTIP is CU Foundation’s Long Term Investment Portfolio and includes the endowment.
In the period from Sept. 30, 2004 to Sept. 30, 2007 when the market was moving up, we outperformed both our benchmarks (policy index) and the S&P 500. During the recent period from Sept. 30, 2007 to Dec. 31 2008 when the market was falling, our loss was significantly less in comparison.
Put another way, if you had invested $100 in the stock market on Sept. 30, 2004, your investment would be worth $88 on Dec. 30, 2008. Had you invested the same amount in the CU endowment, your $100 would have grown to $123.
Yet the reality remains that the endowment’s value has been eroded, which will ultimately impact distributions transferred to CU by the foundation. Our academic partners have been informed of the anticipated financial impact to assist with budgeting.
Good Time to Establish an Endowment
Precisely because the country is in an economic downturn, we are working harder than ever to reach out to potential donors with the message that now could be an excellent time to establish an endowment.
Our investment managers are hunting for opportunities to position today’s investments to become tomorrow’s returns. If you think of the old adage, “buy low, sell high”, there are a multitude of possibilities to buy investments at a deep discount with the potential for significant upside potential when the market rebounds.
Recently, the Chronicle of Higher Education cited the CU Foundation as an example of a savvy investor: selling emerging-market stocks and loading up on bonds prior to the market’s decline. The Foundation’s investment team has been looking into the kinds of investments that have been battered by the markets and are being offered by cash-strapped investors at bargain-basement prices.
Keeping on in sunny days and cloudy
Foundation President and CEO Wayne Hutchens says that though the near term economic picture remains quite cloudy, he is optimistic that the fiscal and monetary policy steps being taken worldwide, combined with our thoughtful investment decision-making process, will position the endowment for strong future growth.
“We take our role seriously in the management of the community’s gifts to the university,” said Hutchens. “Although it’s been a painful time for the markets, over the past five years, CU’s endowment investments rose a cumulative 27.9 percent while the S&P lost (13.7) percent. I think that’s very reassuring.”
“We’ve been able to rack up strong long term returns and plan to just keep on keeping on—both on sunny days and when it’s cloudy.”
If you have any questions about the endowment, please contact cu.foundation@cufund.org.
