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AU endowment hits $318 million

BY MATT GETTY

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AU’s endowment rose to $318 million at the close of January, a rise of $47 million from the end of last fiscal year. The current level reflects a decade of growth that began when the endowment hovered under $40 million in 1995.

According to Don Myers, vice president of finance and treasurer, the university’s soaring endowment has resulted in large part from an aggressive investment strategy. With 85 percent of endowment assets in long-term investments, the Board of Trustees’ finance and investment committee has geared the endowment toward growth.

Endowment Performance

Average Investment Pool Compounded Nominal Rates of Return for Fiscal Years Ending June 30, 2005 and for Selected Three, Five, and Ten-Year Periods

Thus far, their strategy has paid off. Over the last 10 years, the endowment itself has generated a return of nearly 12 percent. “That’s pretty impressive,” said Myers, noting that the rate outpaces averages for institutions with comparable endowments and those with endowments as high as $1 billion. Furthermore, he said, it’s nearly on par with institutions whose endowments exceed $1 billion.

The endowment’s remarkable growth, however, hasn’t come solely from a solid investment strategy. Disciplined financial planning also plays a vital role. In the mid-1990s Myers recommended saving 2 percent of total revenue for the endowment, a goal the university reached with the last two-year budget. “These annual transfers to the endowment demonstrate a financial discipline and commitment to building the university’s asset base,” said Myers. “Our goal of increasing the endowment is strategically targeted to support the university’s long-term academic mission.”

Made up of donations, investment income generated from those donations, and university savings, the endowment has a twofold impact. On the one hand, it provides ongoing funding for the specific endowed scholarships, faculty chairs, and centers for which its funds are designated. On the other hand, as a key indicator of financial strength, it also helps attract funding for the university’s more general future. “It demonstrates the financial underpinnings of the university,” said Myers, noting that bond rating agencies look to the endowment when grading the university on its suitability for bond investors.

Thanks in part to the healthy endowment, AU has gone from being unratable in 1984 to earning an “A2” rating from Moody’s and an “A” from Standard and Poor’s when it went to the bond market to fund recent construction projects like the Katzen Arts Center. The healthy endowment will be an important factor once again when the university returns to the bond market in the next few months to fund construction of the new SIS building and renovation of the McKinley Building and Nebraska Hall.

According to senior director of development Abbey Silberman, the endowment also serves as a beacon to potential future benefactors. “The rising endowment only adds to the reasons why AU is a good investment for donors,” said Silberman, who noted that donors who contribute to the growing endowment have a far-reaching effect on AU. “It must be remarkably moving to know that, whether through an academic chair, named center, scholarship, coaching position, or book fund, the impact of your generosity will grow over decades and even centuries.”