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 $725 million
  • Approximately $275 million in spendable and special reserves, some with investment restrictions
  • Approximately $13 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, 2018:
  • $131 million supports scholarships, fellowships, student awards and prizes, and general student aid
  • $81 million supports chairs and professors
  • $124 million supports research
  • $200 million supports specific needs of academic units

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 betterment 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.

Investment performance and policies

The portfolio and its management

At June 30, 2018 the market value for total investments of the University at Buffalo Foundation and Affiliates (UBF) amounted to $1.026 billion, as compared to $940.4 million at June 30, 2017 and $842.5 million at June 30, 2016.

Endowment funds included in total investments amounted to $725.0 million at June 30, 2018, as compared to $659.2 million at June 30, 2017 and $601.0 million at June 30, 2016. These funds are managed under the supervision of UBF’s board investment committee.

More than 80 professional investment firms 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 $1.000 billion at June 30, 2018, 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

Investment performance, on a total return basis net of fees, is most appropriately reviewed over the longer term with benchmarking to proper indices.  Policy Benchmark returns are average returns of indices weighted consistent with portfolio allocation (see Key to Indices).

Total annualized return
  1 Year 3 Year 5 Year
Long-Term Portfolio 9.1% 7.1% 7.7%
Policy Benchmark* 9.3% 6.7% 7.6%
CPI + 5% 8.0% 6.9% 6.6%

14% CRSP Total Market Index / 5% S&P 500 / 12% 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 / 5% Mercer Illiquid Natural Resources Index / 2% Swiss Re Global Cat Bond

U.S. equity return
  1 Year 3 Year 5 Year
Long-Term Portfolio 14.6% 12.7% 13.4%
Dow Jones US Total 14.8% 11.6% 13.2%
S&P 500* 14.4% 11.9% 13.4%

*Standard and Poors 500 Index

International equity return
  1 Year 3 Year 5 Year
Long-Term Portfolio 5.7% 5.5% 6.5%
MSCI* AC World ex USA 7.3% 5.1% 6.0%

*Morgan Stanley Capital International

Global equity return
  1 Year 3 Year 5 Year
Long-Term Portfolio 13.9% N/A N/A
MSCI* AC World (Net) 10.7% N/A N/A

*Morgan Stanley Capital International

Fixed income return
  1 Year 3 Year 5 Year
Long-Term Portfolio  0.1% 1.9% 2.2%
Barclays US Aggregate -0.4% 1.7% 2.3%

 

Real assets return
  1 Year 3 Year 5 Year
Long-Term Portfolio 10.7% 10.7%   9.8%
NCREIF* Townsend Blended   9.8% 11.5% 12.2%

*National Council of Real Estate Investment Fiduciaries

Hedge funds return
  1 Year 3 Year 5 Year
Long-Term Portfolio   4.8%  2.6%  4.6%
HFRI* Fund of Funds   5.5%  2.0%  3.5%

*Hedge Fund Research, Inc.

Private equity return
  1 Year 3 Year 5 Year
Long-Term Portfolio 18.2% 11.6% 12.7%
Burgiss Global Private Equity 19.1% 12.1% 13.8%

 

Long-term portfolio performance compared to benchmarks

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

Average Annual Compounded Nominal Return Fiscal Years Ended June 30

  Return NCSE Median NCSE Rank
2017 13.1% 12.5% 35.0%
2015-2017  4.7%   4.1% 32.3%
2013-2017  8.3%   7.9% 39.0%

NCSE:        NACUBO – Commonfund Study of Endowments (over 800 colleges and universities)
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, 2018 was as follows:

  Manager Type Long-Term
Portfolio
Long-Term
Target
US Equity 19.2% 20.0%
International Equity 16.5% 17.0%
Global Equity   7.3% —–
Private Equity 14.8% 20.0%
Cash   0.5% —–
Fixed Income 13.0%   8.0%
Hedge Funds 19.0% 20.0%
Real Assets 9.7% 15.0%
TOTAL 100.0% 100.0%

NOTE: Long-term target is goal for 2022.

Spending policy

Spending is defined as funds made available annually from the Long-Term Portfolio for university programs and administrative expenses.

Spending on university programs will be approximately 4% of the donor’s entire original contribution after the first full year of participation in the Long-Term Portfolio.  Afterwards, spending will increase annually at the average rate of inflation, regardless of market performance.  This approach provides a stable and predictable annual stream of funds for use that maintains its purchasing power over time.

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 July 1, 1998 invested in the Long-Term Portfolio would have been worth $1,188,950 as of June 30, 2018, prior to the Fiscal Year 2019 distribution. In addition, $1,049,557 would have been cumulatively distributed in total from Fiscal Year 2000 through Fiscal Year 2019, with annual spending growing from $44,592 in Fiscal Year 2000 to $51,875 in Fiscal Year 2019.