The university endowment fund took a $200 million hit last year, but its current condition is stable, and even showing signs of improvement, Chancellor Victor Boschini said.
After withstanding the turbulent financial atmosphere of recent months, the funds appear to be in good hands after years of conservative and prudent spending tactics, Boschini wrote in an e-mail Wednesday.
“This enduring policy of fiscal conservatism has helped make TCU as strong as it is today despite the ups and downs of our general economy,” Boschini wrote.
The board of trustees, in hopes of protecting students, chose to maintain the current level of endowment spending within the year’s budget, Boschini said.
“Because of volatile market conditions, the value of the endowment has dropped,” Boschini wrote in an earlier e-mail back in April. “Even so, the board has determined to maintain funding equal to last year’s endowment payout of approximately $59 million.”
Students were the top priority in terms of budgeting, with funds being spent first on essential services, like additional housing and extra teachers, Boschini wrote in Wednesday’s e-mail. With an incoming class of more than 1,800 students this year, the remaining revenue generated by their enrollment will be returned to the university endowment.
“The endowment provides a permanent flow of support for the university,” Boschini wrote. “Thus it would always be prudent to put more into the endowment whenever possible.”
Jim Hille, chief investment officer for the university, said the goal of any endowment spending approach is to protect the corpus, the core principal of a bond, and spending outside the university’s means is never preferred. With the value of the endowment falling last year, sustainable spending and budgeting remains the focus, Hille said.
In prudently choosing to keep endowment spending at a constant, the board’s strategy is not only appropriate, but also within legal boundaries, Hille said. The Uniform Prudent Management of Institutional Funds Act dictates the percentage of an endowment an institution should spend is no greater than 7 percent of the fair market value of the asset, he said.
Hille said this year’s budget included roughly $58 to $59 million from the endowment. This figure falls well within the UPMIFA guidelines and amounts to about 5 percent of the total fund value, which currently hovers near the $1 billion mark.
Boschini wrote that the board has made modest spending decisions in attempts to prevent extreme swings caused by economic turmoil.
“Basically, the women and men who have been on our board have always been good at taking a long term view of the institution, thus providing for it into perpetuity,” Boschini wrote.