<p>U-M</a> earns 9% annual investment return for the decade, beats the S&P 500</p>
<p>According to the article, Michigan has the 7th largest endowment in the nation, 2nd largest among public universities. However, the largest endowment among public universities belongs to the entire University of Texas system, which has 200,000 students, 17,000 faculty on 15 campuses. By far the wealthiest UT campus is Austin, but its endowment is under $6 billion, giving Michigan the largest endowment among publics in a single campus.</p>
<p>Another interesting bit is the gowth of Michigan's endowment annually. At 9%, it was more than twice larger than the average endowment growth among US universities.</p>
<p>alexandre, you should know that a percentage means nothing without a quantifiable risk metric.
LTCM had a return % way higher for years. Look what ended up happening to them.</p>
<p>I am not implying that the university took excess risk like LTCM did, I am merely pointing out that without a quantifiable risk metric, it’s hard to assess if 9% is impressive or not.</p>
<p>btw… 9% inflation adjusted or 9% non-inflation adjusted?</p>
<p>I agree bearcats, although like most universities, Michigan’s risk appetite is probably relatively tame. If it weren’t for the September 2008 - May 2009 period, Michigan’s annual growth would have been 15%.</p>
<p>As for the 9% growth, I would assume it is inflation adjusted, but I am not certain.</p>
<p>lol just ask harvard how those swaps are working out for them</p>
<p>[Harvard?s</a> Bet on Interest Rate Rise Cost $500 Million to Exit - Bloomberg.com](<a href=“Bloomberg Politics - Bloomberg”>Bloomberg Politics - Bloomberg)</p>
<p>btw I am inclined to think it’s not inflation adjusted just because of the fact they didn’t mention it. If I were not gonna mention it, I would obviously use the non-adjusted figure just to make myself look better</p>
<p>but then to put things in perspective, T-bill was at 6.33% at one point in 2000. This means the university could have made 6.33% risk free through these years. Now you wonder if the additional 2.67% is worth taking a market risk.</p>
<p>Like I said bearcats, had the market not crashed, Michigan’s endowment would not have stood at $9 billion instead of $6 billion and its annual returns would have been around 15% rather than 9%. 9% was a result of a catastrophic financial meltdown.</p>
<p>yea but this was what my point is about. As institutes that cannot afford to lose much (in order to maximize output for its students), would they have been better off just investing in risk-free t-bills? Or…should universities take risk at all? </p>
<p>I could care less about private companies taking risks at their own expense… but a university’s goal should be maintaining service, not making money. </p>
<p>I really have no side in this argument. I am just pointing this out as something that i thought was interesting</p>
<p>I make these observation under the premise that financial meltdown should be taken account in market risk.</p>
<p>Still, over time, 6% annually is significantly worse than 9% annually.</p>
<p>but that’s why I was wondering if 3% was worth the risk. remember, t-bill is risk-free.</p>
<p>Bearcats, should our endowment grow by 6% annually over the next decade, it would reach $10.7 bilion in the next decade. Should it grow by 9% annually over the same time, it would reach $14.2 billion. That’s a pretty hefty difference. And that’s assuming we have a similar meltdown every decade. That is not the case. Meltdowns of this magnitude occur once every 4 or 5 decades. So imagine if Michigan opted for a 6% return on investment annually since 1988. Our endowment in 1988, $250,000,000. At 6% annually, our endowment today would have stood at $1.5 billion instead of $6 billion. That is a HUGE difference.</p>
<p>So, in the long term, I think it is worth taking slight risks, as long as they aregrounded in sound and ethical financial practice.</p>