UVa told to plan for limited gain on endowment

The University of Virginia’s Board of Visitors seemed little surprised on Saturday morning to hear that the university’s endowment is expecting limited returns on its investments over the coming year.

In addition, the board was told soon to expect one of the worst first-quarter reports in the endowment’s investment history.

The harbinger of bad news was Chris Brightman, University of Virginia Investment Management Co., whose remarks to the board included a tongue-in-cheek reading of articles he’d underlined in Friday’s edition of the Financial Times.

Brightman said UVa’s returns on its $5 billion-plus endowment — at 5.9 percent for fiscal 2008 — is in line with returns of other schools in its peer group, which includes Duke University and Brown University, who each had returns of a little more than 6 percent.

Harvard was leading the pack with an 8.6 percent return, he said.

UVIMCO internally considers its investment peer group those schools with endowments in excess of $2 billion, Brightman said.

However, Brightman said the last fiscal year, which ended June 30, seemed like “ancient history.”

“And many people will be wondering how has [the endowment] done in the first quarter of the new fiscal year, and the answer is, ‘It’s terrible,’” he said.

That candor drew facetious laughter from many of the roughly 30 people in the Upper-East Oval Room of the Rotunda. Brightman added that the policy benchmark for the first quarter of this fiscal year is negative 10.6 percent and that he expects the final number to be within 1 or 2 percent of that estimate.

The endowment lost a combined $191 million in July and August, UVIMCO reports show.

However, it has returned roughly $1 billion since June 2006.

The worst quarter for the endowment in the last 20 years came in 1990, when the return was negative 10.2 percent at a time when there was real-estate crisis and the U.S. was engaged in the Persian Gulf War.

The worst quarter that UVIMCO has on record came in 1987 when the stock market tanked and the return on the endowment was down 12.2 percent, Brightman said.

Numbers on the how the endowment fared during the most recent quarter — which ended on Sept. 30 — should be finalized this week.

Saturday’s news was the cap on a series of dour reports to the board this week about how the recent downturn in the economy is cutting into the university’s state funding and sapping the endowment.

On Thursday, UVa President John T. Casteen III lamented to the board that proposed cuts to higher education that Gov. Timothy M. Kaine recently solicited from all state agencies were likely going to be made permanent.  The university should find out by mid-October about how deep the state cut will go.

And on Friday, while remaining upbeat about the long-term health of the university’s endowment, Bob Sweeney, UVa’s senior vice president for development and public affairs, said the school was in talks with several donors who could contribute millions of dollars, but he noted that UVa’s fundraising officers were running into donor concerns about giving in light of the current economy.

Saturday was the third and final day of meetings for the Board of Visitors — the university’s main governing body — who convened for their latest session on Thursday.  The group is scheduled to meet again in February.