Carolina Alumni Review - January/February 2009

THE ENDOWMENT GOES LONG

“I don’t think it’s a huge problem at public schools,”Vedder said. Paying out more “is not going to make the difference between UNC being a high-cost university and a low-cost university.” But, he says, “it could be the difference between a tuition increase and no tuition increase for the year.”

It also is worth noting that only a small percentage of UNC’s endowment assets are unrestricted — meaning that they aren’t already directed by donors to some specific end uses. The endowment is anything but a monolithic lump sum; rather, it is a collection of independent pools of money representing more than two dozen campus sources, ranging from the Arts and Sciences Foundation, the Kenan-Flagler Business School and the GAA, to the Botanical Garden, Golden Fleece and Carolina for Kibera. And much of that money already is earmarked.

According to 2007 figures from the Investment Fund, about half of the endowment is reserved to fund professorships; other slices of the pie are set aside to fund the library, scholarships and fellowships. Only about 13 percent of the endowment is unrestricted, meaning it can be used for any purpose. Given these restrictions, Schwab says the investment fund spends more time worrying about smoothing out performance troughs to ensure payouts of a dependable size from year to year. “The big issue is predictability, so that the University can count on a certain number of dollars coming in every year,” he said.

The board of directors of The University of North Carolina at Chapel Hill Foundation Investment Fund Inc.

The primary responsibility of the board is to oversee the allocation of the fund among asset classes, investment vehicles and investment managers. It is responsible for adopting investment objectives and policies, for overseeing the manager selection process, and for monitoring policy implementation and investment performance. The chancellor, the vice chancellor for finance and administration, the trustees chair and the vice chancellor for advancement are ex officio members.

Max C. Chapman Jr. ’ 66, chair
Chair
Gardner Capital Management

Holden Thorp ’ 86
Chancellor
UNC

Sallie Shuping-Russell ’ 77, vice president
Managing director
Blackrock Private Capital Markets

W. Clay Hamner Jr. CEO and managing partner Montrose Capital Corp.

Richard L. Mann, treasurer Vice chancellor for finance and administration UNC

Peter Grauer ’ 68 Chair and president Bloomberg

Matthew Kupec ’ 80, secretary Vice chancellor for advancement UNC

Sallie Krawcheck ’ 87
Former chair and CEO
Citi’s Global Wealth Management Division

Nelson Schwab III ’ 67 Managing partner Carousel Capital

Paul Fulton Jr. ’ 57
Former CEO
Bassett Furniture Industries Inc.

Allen B. Morgan ’ 65 Chair and CEO Morgan Keegan Inc.

Roger Perry ’ 71
President
East West Partners Management Co. Inc.
Chair, Board of Trustees

Willard J. Overlock Jr. ’ 68
Senior director
Goldman Sachs Group Inc.

Hard times are here

Tumultuous market years like 2008, of course, can make maintaining that sort of predictability a lot more difficult. If the current commotion isn’t enough of a reminder, history shows that the market hasn’t always been as kind to endowment funds as it was over the past decade or so. The CCAP’s Vedder notes that, from the mid-1960s to the early 1980s, the typical university endowment saw no increase in size if adjusted for inflation.

The economic downturn certainly is being felt here.

Moody’s, a financial research service, reported that nationwide, endowments were down 5 to 7 percent in 2008. And at the November meeting of the UNC Board of Trustees, UNC Management Co.’s King reported that the fund was down more than 13 percent in what he called “a diffi-

William B. Harrison Jr. ’ 66 Chair of the board JPMorgan Chase & Co.

John L. Townsend III ’ 77 Private investor, retired general partner Goldman Sachs Group Inc.

cult and challenging” fiscal year 2009.

“Right now, nothing is working,” King told the trustees. The fund’s five-year success rate, he said, “had built a really nice cushion to get us through this tough time.”

So perhaps the odds are against the UNC endowment having quite so hot an investment hand in the years to come. The chances are very good, however, that it will do a lot better than you.

DARV JOHNSON ’ 93 is a freelance writer based in Chapel Hill. Most recently he covered faculty retirement in the November-December 2008 issue of the Review.