Endowment affects UNC unevenly

The significant drop in UNC’s endowment last year doesn’t mean that students should change their expectations for academic quality, University officials said.

This is because the private donations in the UNC Investment Fund, the University’s overall endowment, have substantially increased in value since their original investment, enabling them to withstand last year’s large drop.

That means despite a drop of almost $441 million between July 2008 and July 2009, a 19.6 percent decrease, students won’t see classes cut or professors laid off.

It just means that the University will slow its hiring rate and overall growth.

“We have very few funds that are in trouble because of the outstanding performance of the UNC Investment Fund,” said Del Helton, director of donor relations and communication at the Arts & Sciences Foundation.

The foundation is an organization that collects and manages donations to parts of the College of Arts and Sciences and makes up about 6 percent of the total UNC endowment.

The UNC Investment Fund’s growth in the past few years — 8.1 percent over the past 10 years and 10.4 percent in 20 years — is a major reason why last year’s hit won’t have a big effect.

“It’s a really great fund. It has a really good track record,” said Dee Reid, director of communications for the College of Arts and Sciences.

In the college, endowment money is often used for scholarship, lectureships, visiting lecturers, faculty support and graduate fellowships.

Each year, the board of directors of the UNC Management Company, which oversees the UNC Investment Fund, determines what percent of the fund will be “paid out” — spent toward the original purpose of the gift, such as financing a scholarship or a lectureship.

Usually 4.5 to 6 percent of the fund is paid out annually.

Some funds in the UNC Investment Fund are “underwater,” meaning that the market value of the fund is less than the investment’s original value.

Helton said the main reason students won’t feel the presence of the “underwater” funds is because the decline in the amount paid out this year will not cause the University to lose much, though it might slow growth.

“Really it’s just delaying the benefit of the fund,” Helton said.

Helton said about 90 of the roughly 500 funds overseen by the Arts & Sciences Foundation are “underwater.”

This does not mean these funds will stop paying out, Helton said.

While the endowment drop is not an immediate problem, Reid said the well-being of the College of Arts and Sciences hinges on a financial recovery.

“If there’s no recovery, the programs won’t grow,” she said.

Reid said that while students will not be significantly affected by the endowment’s drop, there might be consequences for faculty, such as limits on how much research professors would be able to do.

“It has been hard on faculty and staff, but we’ve tried to make it seamless for students,” Reid said.



Contact the University Editor at udesk@unc.edu.