University endowment firm insists strategies sound

The CEO of the company managing the University of Virginia’s endowment has asserted the stability of its investment strategies amid a global economic downturn.

The open letter to the UVa community is the third issued by the University of Virginia Investment Management Co. in the last three weeks, but the first from company CEO Chris Brightman.

Brightman focused on the endowment’s long-term pool over the last year and how in the last four months those investments have lost roughly $1 billion. That equates to roughly a 21 percent loss in the endowment pool’s value from October 2007 to October 2008, Brightman wrote.

“To be sure, this is a startlingly large loss,” Brightman wrote. “When put into appropriate context, however, it starts to seem less disturbing.”

Brightman noted that while the endowment pool lost $1 billion recently, it grew $1.6 billion between June 2005 and June 2008, leaving the pool $600 million ahead, or at roughly $4.1 billion overall.

The letter also says the investment company is not borrowing money to meet its obligations and recently directed its investors to buy up $250 million in distressed residential housing.

At the same time, UVa has $1.8 billion committed for use by private investors that has not yet been invested. The investment company expects that money will be “called” into investments within the next five years — with $600 million expected to be called upon in the next year, Brightman wrote.

The investment company has enough liquidity to supply investors with the money it has committed to them without borrowing money, Brightman wrote. Additionally, the investment company will also divest itself from some hedge-fund investments in the next several years, leaving slightly more than a quarter of the endowment pool invested in hedge funds.

Brightman’s letter was posted to the investment company’s Web site on Nov. 26, the same day the New York Times published a story about the declining health of many of the nation’s largest college and university endowments.

The Times’ article heavily cites the endowment troubles at UVa.

UVa spokeswoman Carol Wood said Brightman’s letter was scheduled for release before Thanksgiving and was not issued in concert with the Times’ article.

Prior to Brightman’s letter, UVa officials had also pushed to quash reports the endowment pool — which consists of the core endowment, university-related foundations’ endowments and nonendowment assets — is in a financial trouble.

Two other letters issued in November came from UVa President John T. Casteen III and Executive Vice President and Chief Operating Officer Leonard W. Sandridge.

Those letters, in addition to Brightman’s, stressed that during a 10-year period the endowment pool returned 12 percent overall while the S&P 500 — an index of 500 common company stocks in the United States — returned 0 percent over the same time period.

UVa is one of roughly 70 colleges and universities nationwide that has an endowment that exceeds $1 billion in investments, according to the National Association of College and University Business Officers, which tracks endowment values.

The national association’s annual endowment ranking put Harvard University’s holdings on top with roughly $34.5 billion as of June 2007. However, recent media reports show the Harvard endowment was valued at roughly $37 million at the end of June. However, that money has reportedly taken an estimated $8 billion hit during the last four months.

A report on UVa’s endowment pool investments is expected in mid-December.