Inaya Mclaughlin
The University of Michigan does operate an investment portfolio. The university's investment policies are governed and authorized by University Bylaws and the Board of Regents. The university maintains centralized management for its cash and investments, with four basic types of funds to invest: operating funds, endowment, life income agreements, and insurance and benefits reserves.
The University Investment Pool (UIP) provides depositors with daily access to their funds without the risk of loss, alongside a corresponding rate of return. The university also offers retirement savings plans in partnership with TIAA and Fidelity Investments.
Michigan Ross, the undergraduate business program at the University of Michigan, offers student-run investment funds, providing hands-on experience in managing and growing a real investment portfolio.
| Characteristics | Values |
|---|---|
| Investment policies | Governed and authorized by University Bylaws and the Board of Regents |
| Investment types | Operating funds, endowment, life income agreements, and insurance and benefits reserves |
| Operating funds | Operational working capital and unexpended bond proceeds |
| UIP rate of return | Based on the 90-day U.S. Treasury Bill rate |
| Endowment funds | True endowments and quasi-endowments |
| Endowment fund value | $17.9 billion as of June 30, 2023 |
| Endowment fund spending | $470 million for fiscal year 2023 |
| Endowment fund distribution rate | 4.5% of the average seven-year market value of endowment shares |
| Investment portfolio diversification | Stocks, bonds, absolute return, real estate, venture capital, and other investments |
| Investment partners | TIAA and Fidelity Investments |
| Custom investment portfolio | Customizable through TIAA and Fidelity platforms |
What You'll Learn
The University of Michigan's endowment funds
The university's endowment funds consist of both true endowments and quasi-endowments. True endowments are permanent endowment funds received from donors with the stipulation that the principal remains untouched and is invested to produce a never-ending source of support for the purposes specified by the donors. Quasi-endowments are funds reserved by the university on a permanent or long-term basis for specific programs or projects critical to the university's mission, financial health, and growth.
The University of Michigan's endowment was valued at $17.9 billion as of June 30, 2023. The majority of the university's endowment funds are pooled in the unitized University Endowment Fund (UEF), which consists of more than 12,600 separate endowment funds. These figures represent endowment funds for the university's three campuses and Michigan Medicine, the university's health system.
The University Endowment Fund is a unitized pool invested in the university's Long-Term Portfolio. Contributions to the UEF buy shares at the share value as of the end of each quarter (September, December, March, and June). The market value of an endowment can be determined by multiplying the number of shares an endowment owns by the current quarter's share value.
The university's investment policies are governed and authorized by University Bylaws and the Board of Regents. The university maintains centralized management for substantially all of its cash and investments, and individual units are not allowed to invest funds directly. The University Investment Pool (UIP) provides depositors with daily access to their funds without the risk of loss, with a corresponding rate of return.
The university's long-term investment strategy and spending policies have generated about $5.9 billion in endowment distributions to support vital operations since the start of the fiscal year 2000. The endowment has allowed the university to create innovative programs, conduct world-class medical care and research, and support dozens of top academic programs.
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The University Investment Pool (UIP)
The University of Michigan's investment policies are governed and authorized by University Bylaws and the Board of Regents. The University Investment Pool (UIP) is one of the four basic types of funds that the university invests. The other three are operating funds, endowments, and insurance and benefits reserves.
The UIP is composed of operational working capital and unexpended bond proceeds. It provides depositors with daily access to their funds without the risk of loss, alongside a corresponding rate of return. The rate of return is based on the 90-day U.S. Treasury Bill rate and will not exceed 2.50% under any circumstances. Depositors are defined as university school, college, or unit cash balances in total by Fund-Department combination.
UIP distributions are credited or debited to each Fund-Department combination automatically on a monthly basis. However, monthly UIP distributions are generally not provided to sponsored programs, agency or endowment funds.
The UIP is managed centrally by the university. Individual units are not allowed to invest funds directly.
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Retirement savings plans
The University of Michigan offers a range of retirement savings plans to its employees. These plans provide an important source of income during retirement, in addition to Social Security and personal savings. The University does not offer a pension plan.
Basic Retirement Plan
The Basic Retirement Plan is a defined contribution retirement plan. It offers immediate vesting and a two-for-one university match. Enrolled participants contribute 5% of eligible compensation, and after a 12-month waiting period, the university contributes 10% of eligible compensation. This plan is a combination of a 403(b) for employee contributions and a 401(a) for university contributions.
B) Supplemental Retirement Account (SRA) and 457(b) Deferred Compensation Plan
The University of Michigan also offers employees the opportunity to save more for retirement through a 403(b) Supplemental Retirement Account (SRA) and a 457(b) Deferred Compensation Plan. These plans allow for contributions on a pre-tax or after-tax (Roth) basis.
Investment Options
Employees can choose to invest their retirement savings with two investment companies: TIAA and Fidelity Investments. These companies offer a range of investment funds, including mutual funds, fixed and variable annuities, domestic and international stock funds, bond funds, money market funds, and real estate funds. Additionally, employees have the option to create a custom portfolio that suits their retirement goals.
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Student-run investment funds
The University of Michigan does operate an investment portfolio, and it includes student-run investment funds.
Michigan Ross, the business school at the University of Michigan, offers more student-run funds than any other MBA program. Students can gain hands-on experience investing, managing, and growing a real investment portfolio before earning their degree. The school offers a variety of funds, ranging from early-stage ventures and commercialization to funds with specific investment themes, like social impact and real estate.
One of the student-run funds is the Wolverine Venture Fund, which focuses on healthcare, technology, and sustainability investments in the early stages. Students can dive into the entire process of venture investing, including sourcing applicants, initial analysis, due diligence negotiation, and monitoring the portfolio.
Another fund is the Zell Lurie Commercialization Fund, which focuses on investments in the education, healthcare, technology, and sustainability sectors, from the early stage to Series A and beyond. Students can evaluate new technologies developed at the University of Michigan, perform due diligence, and pitch the inventor on the investment team's proposal.
The International Investment Fund, in partnership with the William Davidson Institute, focuses on investing in and supporting small and medium-sized enterprises in emerging economies, starting in India and expanding worldwide.
The school also has a unique fund called the Zell Founders Fund, which lets students invest in other students. Each year, the fund awards money to promising business projects pitched by fellow MBA students.
These student-run investment funds provide a valuable opportunity for students to apply their knowledge in a real-world setting and make investment decisions with guidance from advisory boards, faculty mentors, and industry experts.
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The University's investment policies
The University of Michigan's investment policies are governed and authorized by University Bylaws and the Board of Regents. The university is subject to the Uniform Prudent Management of Institutional Funds Act (UPMIFA), enacted by the State of Michigan in 2009.
The university maintains centralized management for its cash and investments. Individual units are not allowed to invest funds directly. The University Investment Pool (UIP) provides depositors with daily access to their funds without the risk of loss, with a corresponding rate of return. The rate of return is based on the 90-day US Treasury Bill rate, with a cap of 2.50%.
The university has four basic types of funds to invest: operating funds, endowment, life income agreements, and insurance and benefits reserves. Operating funds are composed of operational working capital and unexpended bond proceeds, which are invested in accordance with an adopted Investment Policy Statement. Endowment funds are invested for the long term, with a portion of investment returns distributed to support university programs and operations. There are two types of endowments: true endowment and quasi-endowment. True endowments are permanent funds received from donors with the stipulation that the principal remains untouched and is invested to produce an endless source of support for specified purposes. Quasi-endowments are funds reserved by the university on a permanent or long-term basis for specific programs or projects critical to the university's mission, financial health, and growth.
The University of Michigan partners with TIAA and Fidelity Investments to offer investment services for retirement savings plans. These plans include diversified portfolios of mutual funds, such as domestic and international stock funds, bond funds, and money market funds. The university also offers the option to create a custom portfolio by allocating contributions among various funds.
The University's overarching principle related to its endowment and investment strategy is to generate the greatest possible income, subject to an appropriate amount of risk, in support of its missions of teaching, research, and service. To achieve this, the University maintains a diversified investment portfolio across a full range of legally recognized entities.
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Frequently asked questions
Yes, the University of Michigan does operate an investment portfolio. The university has four basic types of funds to invest: operating funds, endowment, life income agreements, and insurance and benefits reserves.
The University of Michigan offers a range of investment funds, including:
- Operating funds: composed of operational working capital and unexpended bond proceeds.
- Endowment funds: true endowments and quasi-endowments.
- Life income agreements: charitable gift annuities, charitable remainder trusts, and donor pooled income funds.
- Insurance and benefits reserves: self-insured for various lines of insurance and employee benefits.
The University of Michigan maintains centralized management for its cash and investments. The university has an Investment Office that evaluates potential investment opportunities and makes recommendations to the university's chief financial officer. The university also partners with TIAA and Fidelity Investments to offer investment services for retirement savings plans.
The University of Michigan's investment strategy is to generate the greatest possible income, subject to an appropriate amount of risk. The university maintains a diversified portfolio, including stocks, bonds, absolute return, real estate, venture capital, and other investments. The university also has a long-term investment strategy for its endowment funds, which have generated significant returns over time.
