Investment Performance

We are proud to be responsible for protecting, growing and managing sizable investments for the University at Buffalo.

These funds, which have grown substantially in recent years under our stewardship, include:
  • An endowment that, through the generosity of our donors, currently totals more than $650 million
  • Approximately $240 million in working capital and special reserves, some with investment restrictions
  • Approximately $25 million in charitable remainder trust and gift annuity investments, some with investment restrictions

Providing reliable returns

Our goal—which we consistently achieve—is to control risks while generating resources from the total investment portfolio, which ensures a reliable return on these funds. This provides UB with a predictable and substantial source of revenue, allowing UB to fulfill its mission.

What does the endowment support?

The endowment—which consists primarily of funds donated for UB through the years—is managed by the UB Foundation in accordance with each donor’s wishes. As of June 30, 2017:
  • $116 million supports scholarships, fellowships, student awards and prizes, and general student aid
  • $79 million supports chairs and professors
  • $119 million supports research

An increasingly important funding source

A strong endowment ensures a certain level of financial stability for UB, an institution that is expected to last in perpetuity. We are committed to helping grow the endowment for the benefit of the university. In keeping with best practices, only the returns on the principal are made available for spending; the endowment principal is protected and invested in order to ensure the buying power stays consistent over the years.

JUNE 30, 2017

The portfolio and its management

At June 30, 2017 the market value for total investments of the University at Buffalo Foundation and Affiliates (UBF) amounted to $940.4 million, as compared to $842.5 million at June 30, 2016 and $867.7 million at June 30, 2015.

Endowment funds included in total investments amounted to $659.2 million at June 30, 2017, as compared to $601.0 million at June 30, 2016 and $619.3 million at June 30, 2015. These funds are managed under the supervision of UBF’s board investment committee.

More than 90 professional investment managers currently share in the administration of the portfolio, with performance monitored by the trustees. Included in this total are certain investments, known as the Long-Term Portfolio and having a market value of $896.1 million at June 30, 2017, which are managed and administered on a pooled basis.

Long-term portfolio investment strategy

The primary investment objective is to maximize total investment return while preserving the inflation-adjusted purchasing power of the portfolio. This should provide a relatively predictable, constant and stable (in real terms) stream of funds for current use. Total investment return is the sum of interest, dividends and capital appreciation.

Long-term portfolio performance compared to benchmarks for fiscal 2017

Total annualized return
1 Year 3 Year 5 Year
Long-Term Portfolio 13.1% 4.7% 8.3%
Policy Benchmark*   9.8% 3.7% 7.4%
CPI + 5%   6.7% 6.0% 6.4%

15% CRSP Total Market Index / 5% S&P 500 / 13% MSCI EAFE / 2% Barclays US TIPS / 9% Barclays Capital Aggregate / 20% HFRI Fund of Funds Composite Index / 2% MSCI Emerging Markets / 3% Vanguard Spliced Emerging Markets Index / 7% MSCI ACWI / 6% NCREIF Townsend Blended Index / 13% Burgiss Global Private Equity Index / 4.0% Mercer Illiquid Natural Resources Index

U.S. equity return
1 Year 3 Year 5 Year
Long-Term Portfolio 17.6% 10.4% 14.3%
Dow Jones US Total 18.5%   9.0% 14.5%
S&P 500* 17.9%   9.6% 14.6%

*Standard and Poors 500 Index

International equity return
1 Year 3 Year 5 Year
Long-Term Portfolio 21.0% 2.6% 8.5%
MSCI* AC World ex USA 20.5% 0.8% 7.2%

*Morgan Stanley Capital International

Global equity return
1 Year 3 Year 5 Year
Long-Term Portfolio 20.1% N/A N/A
Barclays US Aggregate 18.8% N/A N/A
Fixed income return
1 Year 3 Year 5 Year
Long-Term Portfolio  0.0% 2.0% 2.5%
Barclays US Aggregate -0.3% 2.5% 2.2%
Real assets return
1 Year 3 Year 5 Year
Long-Term Portfolio 16.3%   8.8% 10.1%
NCREIF* Townsend Blended   9.8% 12.7% 12.7%

*National Council of Real Estate Investment Fiduciaries

Hedge funds return
1 Year 3 Year 5 Year
Long-Term Portfolio   8.3%  2.6%  6.5%
HFRI* Fund of Funds   6.4%  1.5%  3.8%

*Hedge Fund Research, Inc.

Private equity return
1 Year 3 Year 5 Year
Long-Term Portfolio 11.0%   8.4% 10.8%
Burgiss Global Private Equity   7.6% 10.0% 12.5%

 

Long-term portfolio performance compared to benchmarks

The accompanying chart reflects the ten-year performance for the Long-Term Portfolio in comparison with over 800 other colleges and universities across the country.

Average Annual Compounded Nominal Return Fiscal Years Ended June 30

Return NCSE Mean IF Median
2016 -0.4% -1.9% -1.8%
2014-2016  5.5%  5.2%  4.8%
2012-2016  5.5%  5.4%  5.0%
2007-2016  4.5%  5.0%  4.9%

NCSE – NACUBO – Commonfund Study of Endowments (over 800 colleges and universities)
IF – InvestorForce (over 700 endowments and foundations)
NACUBO – National Association of College and University Business Officers

Asset allocation policy

The proper and prudent distribution of investments among various asset classes allows us to honor spending policies, maintain risk tolerance and stability, produce appropriate investment returns, and achieve long-term objectives.

Asset allocation at June 30, 2017 was as follows:

By Manager Type Long-Term Portfolio Current Target Long-Term Target
Growth Assets
• US Equity
•• All Cap 20.8% 20.0% 16.0%
• International Equity
•• Large 13.4% 13.0% 10.0%
•• Emerging Markets   4.6%   5.0%   4.0%
• Global Equity   7.1%  7.0%  7.0%
• Private Equity 13.3% 13.0% 20.0%
Risk Reduction Assets
• Cash   0.3% —– —–
• US Fixed Income   8.8%   9.0%   8.0%
• US Inflation Protected Fixed   1.8%   2.0% —–
• Hedge Funds 19.4% 20.0% 20.0%
Inflation Protection Assets
• Real Assets 10.5% 11.0% 15.0%
TOTAL 100.0% 100.0% 100.0%

NOTE: Long-term target is goal for 2022.

Spending policy

Spending is defined as funds made available from the Long-Term Portfolio for university programs and administrative expenses, exclusive of management, brokerage and custodial fees.

The Spending Rate will be determined and approved annually by the Investment Committee.  The desired result is to achieve a year to year spending increase for individual funds that approximates the Inflation Rate (Footnote 1), not to exceed 3%.

Total Spending is limited to a floor of 4% and a ceiling of 6% of the three-year average market value of the Long-Term Portfolio, measured on a quarterly basis.  Special spending rules are followed for individual endowments where the value has fallen below historic dollar value.

 

Footnote 1:  Inflation rate is the average of the Higher Education Price Index (HEPI) and the Consumer Price Index (CPI) for the most recent three calendar years.

Long-term portfolio performance

A $1,000,000 gift on June 30, 1997 invested in the Long-Term Portfolio would have been worth $1,265,983 as of June 30, 2017, prior to the Fiscal Year 2018 distribution. In addition, $1,144,836 would have been cumulatively distributed for spending needs from Fiscal Year 1999 through Fiscal Year 2018, with annual spending growing from $40,780 in Fiscal 1999 to $56,391 in Fiscal Year 2018.  The cumulative total of spending is compared to the blended inflation rate over this same period.

A $1,000,000 gift on July 1, 1996 invested in the Long-Term Portfolio would have generated $44,098 for spending in Fiscal Year 1998, with the annual distribution growing to $63,008 for Fiscal Year 2017. This annual growth in spending is comparable to inflation rate growth over this same period.