The numbers from the past few months — like your own
investment reports — are scary to look at.
But over the past decade, the UNC endowment
has been scary good.
by Darv Johnson ’ 93
alk about a winning
Tstreak. There is one team
in Chapel Hill with a
track record so impressive
that it makes UNC basketball’s past decade look
like a country album’s worth of heartbreak,
misery and loss.
Year after quiet year, the UNC endowment — that collection of on-campus foundations and funds bundled together in the
investment vehicle called the University of
North Carolina at Chapel Hill Foundation
Investment Fund — has been racking up
returns that few of its peers can match. And
along the way to breaking the $2 billion
mark, as it did more than a year ago, the fund
has managed to largely fly under the radar in
a world — the $400 billion world of university endowments — that is getting increasing
scrutiny from Congress and critics.
The numbers tell the first part of the
story. The UNC Investment Fund reaped
returns of 23. 4 percent after fees and
expenses in 2007, according to its calculations. That easily outpaced the 17. 2 percent
average growth of the 785 colleges and universities surveyed by the National Association
of College and University Business Officers
(NACUBO). When the impact of new
donations to UNC is factored in, the endowment grew by almost one-third in that year,
trailing only Notre Dame in overall growth.
And 2007 was no fluke. The endowment
returned 8 percent in 2008, a more modest
number, but still good enough for second
place in the endowment fund rankings.
Over a 10-year period, the endowment
grew an average of 12. 1 percent a year;
with additions of new money and investment returns, the $597 million it started
with is now worth more than $2 billion.
That made UNC the nation’s 30th largest
endowment at the end of the 2007 fiscal
year, according to the NACUBO survey —
well behind Harvard’s $34 billion, but ahead
of New York University, Penn State, Boston
College and the University of Illinois,
among many other big-name institutions.
So what can average investors — who
haven’t seen anything like these kinds of
returns in their retirement accounts —
learn from UNC’s success? Perhaps less
than they might think. Indeed, the armchair investor might find trying to imitate
an endowment fund’s strategies about as
useful as trying to duplicate a Tiger Woods
drive off the tee: You might comprehend
the principles, but you don’t have the tools
to put most of them to work for you.
Cristian Tiu, an assistant professor of
finance at the State University of New
York at Buffalo who studies university
endowment performance, ticks off some of
the reasons that we can’t imitate these institutions. As individual investors, he says, “we
have to pay taxes. We have to have enough
money to invest in hedge funds and venture capital. We cannot diversify as broadly
as university endowments.”
It’s all those reasons and then some.
Even before the opening bell rings, the
endowment fund has a huge advantage
with its access to a rarified world of financial expertise. The fund’s investments are
overseen by roughly two dozen employees
at the UNC Management Co., a nonprofit
formed in 2003 that also manages the
endowment assets of nearly a dozen other
schools in the UNC System. President and
CEO Jonathon King — who did not wish
to be interviewed for this article — was
director of investments for Dartmouth