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University investment fund sees growth

The UH System Endowment suffered a 25.9 percent drop between July 1, 2008 and June 30, 2009 but seems to be improving as the market does.

“The percentage loss of the University of Houston’s endowment was terribly disappointing but actually not as bad as it could have been,” Regent and former Endowment Chairwoman Carroll Ray said.

Ray said this happened during a period that’s considered by many economists to be the worst financial crisis since the Great Depression. Almost all investment funds suffered significant losses during this time.

According to The Chronicle of Higher Education, the UH loss was “greater than the comparable percentage declines of the endowments of the Texas A&M University System and Foundations, the Texas Tech University System, the University of North Texas or the University of Texas System for the same period.”

UH Administration and Finance did not find this claim to be completely accurate. They said the UH endowment drop was greater than that of Texas A&M University and Texas Tech University but beat the University of Texas.

“Rather than using investment performance, the author of the cited blog (as reported by a Chronicle of Higher Education story) seems to have simply taken the beginning and ending values of each endowment from June ‘08 to June ‘09 without accounting for cash flows (new gifts or distributions),” UH Director of Media Relations Richard Bonnin said.

“The losses cited in the article are not all ‘real’ losses. Most of it is unrealized loss. Until we sell the investments, we only have a loss on paper and the endowment already has recouped some of the unrealized loss as the market has improved.”

The recent budget cuts and tuition increase were not a result of the UH endowment drop but in response to mandates by the State of Texas.

“Again, it was very disappointing to see the precipitous drop in the UH endowment asset value during this most recent financial crisis, but according to most experts, the only way to have avoided participating in this drop would have been to invest our funds in very secure cash equivalents such as US treasuries,” Ray said. “Over a longer period of time, an investment strategy of this type, while free of risk, would be considered very inappropriate.”

The UH Board of Regents and its administration said they understand that the State of Texas must be fiscally responsible and must choose between many important priorities in choosing how to allocate its finite state resources.

“We are cooperating fully with our mandate,” Ray said.

As the stock market recovered from the great fall, so did the UH endowment.

“I am happy to report that as the market has recovered, so have the University endowments, again including the UH endowment,” Vice President of Administration and Finance Carl Carlucci said.

Bonnin said as of Feb 28, 2009, the UH system endowment and its foundations are at a total of $569 million.

The UH endowment is an investment fund that is funded through donations from private donors and public sources and is used to support the University’s educational mission.

Ray said that each year the endowment distributes four percent of its asset value to the University for a variety of uses.

“Certain portions of the endowment fund are restricted, such as providing scholarships. One purpose of the endowment is to ensure the funds held are available for future generations of University students,” Ray said. “The UH endowment is one of the resources that supports the University of Houston.

In fact, without the endowment the University would be unable to create and fund some of these innovative programs.”

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