UNC faces loss of funds

The value of UNC’s endowment dropped almost $441 million in the last year, a loss that could impact the number of scholarships and professorships offered.

Jon King, president of the UNC Management Company Inc., said it will take several years for the school to recover from this sharp drop in the University’s finances.

The fund dropped 19.6 percent between July 2008 and July 2009, from $2.22 billion to $1.78 billion, according to the company.

“The 2009 fiscal year has been the worst fiscal environment for college endowments ever,” King said in a presentation to the UNC Board of Trustees on Thursday. “When you face a 20 percent loss, it’s probably going to take a number of years to recover.”

But UNC has fared better than many other universities, and King said he is confident in the fund’s long-term prospects.

King said the endowment — a collection of investments that made up about 6 percent of the University’s budget in 2008 — directly suffered from the poor financial climate.

The University uses the interest earned on the endowment to finance scholarships and professorships. The University earned $146.7 million from the investments in 2008. The amount earned on the decreased endowment has not yet been made public.

UNC’s endowment funds are managed by a private financial company, the UNC Management Company Inc.

“Some people see this as just a $1.8 billion bank account but it’s not,” King said. “This $1.8 billion is actually comprised of literally thousands of underlying funds. Most of them are designated for a specific purpose.”

King said the endowment’s decline last year is characteristic of how other universities fared. The 19.6 percent decrease places UNC “squarely in the middle of the pack” of other universities, King said.

King said one-year results should not be emphasized over the bigger picture.

“The key to managing this fund is to maintain a long-term horizon. It’s easy to get caught up in year-to-year results but our job is to be looking forward three, five, 10 years,” he said.

Max Chapman, a former trustee and financial expert who spoke to the board Thursday morning, said he wanted to focus on the long-term growth of the endowment, rather than the short-term loss.

“My message this morning is that while we aren’t happy with last year’s results, we’ve been meeting the goal we’ve been asked to do, which is managing the fund for the long-term for the University.”



Contact the University Editor at udesk@unc.edu.