Casteen looks to head off UVa endowment concerns

University of Virginia officials are aiming to allay concerns about the state of the school’s investments and overall stability in light of a financial crisis that is wracking financial markets worldwide.

In a letter sent out Thursday evening, UVa President John T. Casteen III wrote that while UVa’s endowment investments were hit to the tune of close to $900 million in the first quarter of this fiscal year, the investments will rebound in the long run.

The University of Virginia Investment Management Co., which handles the school’s investments, recently released its quarterly report that valued the endowment’s long-term pool investments at $4.2 billion.

Officials with nationwide educational-advocacy groups have said in recent months that most school endowments likely are taking financial hits similar to the ones at UVa.

This is not the first time UVa’s endowment has been hit hard. In 1987 and in 1991 the endowment had quarterly losses greater than 10 percent. But in both cases the endowment was able to either break even or see a return growth by the end of the same fiscal year.

According to a narrative accompanying UVIMCO’s most recent quarterly report, if the financial markets continue their current trend, then UVIMCO speculates the university’s investments could stand at $4 billion by the end of 2010.

The current financial landscape, however, has not stopped contributions to the university. Since July, roughly $150 million has been added to the long-term pool. That pool includes more than $2.6 billion in the core endowment, $1 billion in foundation endowments and $600 million in other assets.

However, of UVa’s $2 billion operating budget this year, less than 5 percent comes from the endowment pool. The rest of the budget comes from sources such as tuition and state funds.

“We do not expect this crisis to end next week,” Casteen wrote. “Our planning and financial positioning assume a long, slow recovery.”

UVa spokeswoman Carol Wood said Casteen chose to write this week’s letter because he thought UVa’s financial situation was being misrepresented in media reports.

“There was kind of a ‘sky is falling’ tone to some of what we were reading,” Wood said.

Since sending out the letter Thursday evening, Wood said, Casteen has received dozens of e-mails from employees and alumni thanking him for addressing the school’s perceived troubles.

“We started getting responses within 10 minutes,” Wood said.

Casteen also used the letter to reassure employees that any stress on UVa’s budget is not a sign of impending layoffs.

“We have never used layoffs [at UVa] as a means to balance budgets,” Casteen wrote. “Layoffs are not a strategy for us now.”

Casteen made a similar reassurance in an October letter to employees that came in the wake of Gov. Timothy M. Kaine’s decision to cut varying degrees of funding from state agencies. In UVa’s case, the school was saddled with a 7 percent cut this year that amounted to what will likely be a permanent loss of roughly $10 million in state monies annually. That cut came after money was cut last year and word from Kaine that more state reductions could be coming next year.

Leonard W. Sandridge, UVa’s executive vice president and chief operating officer, also sent out a letter this week that touched on the state’s projected budget shortfall and reinforced the stability of employment at the school. His letter was also heavily geared at righting what he considered misconceptions about the endowment.

“We are drawing on our experiences of earlier downturns and working to maintain our momentum as the economy slows,” Sandridge wrote. “In fact, we plan to take advantage of some of the investment opportunities that are emerging.”