October 21, 2014

Endowment reaches $7.5 billion

The University of Chicago endowment reached a new peak in the past year, marking its fifth year of continuous growth.

As of June 30, 2014, the endowment attained a market value of $7.47 billion, an increase of approximately 12 percent from its market value at the end of the 2013 fiscal year, when it was valued at $6.67 billion. This increase is dramatic compared to the 1.5- percent increase between fiscal years 2012 and 2013.

The endowment is the compilation of all contributions provided by donors and returns from investments, minus the amount of spending in the past year. The size of the endowment impacts the amount of investment the University can make.

“The endowment is extraordinarily important because we use it to finance everything from scholarships, to buildings, to activity funds, to speakers, and to salaries,” Hugo Sonnenschein, former University president and economics professor, said. “In the long run, a large and continuously growing endowment is extremely important to the success of the University.”

Over the past two decades, the University’s endowment has increased in value from $1.1 billion to $7.47 billion, a 579-percent increase. The University of Chicago also ranked 13th in the nation for the largest university endowment at the end of fiscal year 2013. The value of the University endowment includes $782 million of Medical Center endowment, and the amount generated from return on investments in the past fiscal year, totaling $447 million.

“The endowment has increased for two reasons... [First], investment returns, particularly in equities, have been very strong in the past five years. [Secondly], the University has done well in fundraising,” Steven Kaplan, a professor of entrepreneurship and finance at the Booth School of Business, said in an e-mail.

From June 30, 2004 to June 30, 2013, contributions and gifts to endowment totaled $799 million.

In the past fiscal year, the University has seen a 12.7-percent return on investments, and in the previous year it was 6.6 percent. These results surpassed the benchmarks set for past years.

These returns come from the Total Return Investment Pool (TRIP), a fund established by the University, in which around 96 percent of the University endowment is invested annually. TRIP’s objective is to obtain a high return on investments, while still attempting to maintain a risk level that is appropriate for the University. The endowment also continues to be invested in a wide range of asset classes and strategies along with the TRIP.

The increase also marks the University’s fifth year of positive investment returns after the 2008–2009 financial crisis, which caused a 21.5-percent loss on investments in the 2009 fiscal year.  Since this decrease in value, $3.6 billion has been added to the University’s endowment.

In the past five years, the accumulated interest result averaged a 12.6-percent increase, and in the past ten years, the average result has increased by approximately 9.6 percent.

Investment returns have also stemmed from bonds recently issued to the University. The Illinois Finance Authority issued $573,645,000 in bonds on August 1 with three separate purposes. These include working on facilities, paying off $455,675,000 in bonds that the University previously withdrew, and paying costs related to issuing the bonds.