During a fiscal year when the vast majority of endowments reported losses – with some losing $1 billion or more – the University of Michigan’s long-term investment portfolio returned 2.2% to raise its asset value by $325 million to $17.3 billion as of June 30.
Michigan is one of the very few endowments to report a positive return for the fiscal year, when the average endowment portfolio lost 6.5%, according to Cambridge Associates. The university also reported a 20-year annualized return of 9.9% and noted that this outperformed the median return of 7.4% among college and university endowments over the same time period.
In March 2021, the university announced that it was immediately shifting its natural resources investments to focus more on renewable energy investments, “including infrastructure and services that support energy efficiency, and emerging technologies that support the transition to a carbon-neutral economy.”
At that time, the board of regents also approved a $140 million investment in three funds directed toward renewable energy development and sustainable infrastructure development. The university said that up to $60 million of that went to a fund that focuses on investments to reduce carbon emissions, sequester carbon dioxide, and develop and support renewable power. As much as $50 million went to a firm that partners with solar developers to gather the land rights necessary to develop utility-scale solar projects, and up to $30 million went to a solar and wind developer and operator.
Although the moves were made as part of a commitment to achieve a net-zero carbon footprint by 2050, they apparently also turned out to be lucrative investments.
“Our investments in renewable fuel and sustainable energy contributed significantly to the positive performance last year, along with other investments that responded well to inflation,” Chief Investment Officer Erik Lundberg said in a statement. He said he will provide more detailed information at an endowment presentation at a board of regents meeting December 8.
University of Michigan Chief Financial Officer Geoffrey Chatas lauded the investment team and Lundberg for its “exemplary management,” adding that “we’re more than satisfied with the portfolio’s continued strong performance.”
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Tags: Cambridge Associates, Chief Investment Officer, Endowment, Erik Lundberg, fiscal 2022, Geoffrey Chatas, renewable fuel, sustainable energy, University of Michigan