Responding to a request from the University's Board of Visitors, the State Senate passed a bill Tuesday that will give the University broader powers in the investment of its $1.5 billion endowment.
The bill was passed in response to the Board's Jan. 22 request for Virginia Governor James S. Gilmore III (R) to introduce legislation to allow the University greater control over the allocation and investment of its endowment.
Board Secretary Alexander G. "Sandy" Gilliam said "in order to undertake certain financial transactions, [the University] has to get permission from the governor" and that the process has become overly complex in recent years.
It is a long, complicated process that would benefit from changes allowing more flexibility to those who allocate funds, Gilliam said.
He said that "maximum flexibility" is especially vital because of the recent volatility of the stock market.
The restricted investments include synthetic securities, as well as investments in the options and futures markets.
The Board's endowment is managed by a team of investment managers and overseen by University Treasurer Alice Handy.
Board member Joseph E. Wolfe said "markets in the past were much slower, and now can change overnight."
Wolfe said those who make financial decisions "literally have to act on a day's or less notice," but the complicated current process interferes with the enactment of essential changes that necessitate immediate action.
University spokeswoman Louise Dudley said the bill "updates the investment choices that U.Va. investment managers can make."
When the currently-used guidelines were established over 20 years ago, many of the investment opportunities that are available today had not even been invented, Dudley said.
Wolfe said it has been "many years since changes have been enacted in these laws and many financial devices and instruments have been added," including a variety of new investment funds.
He said the bill demonstrates the importance of "keeping up with modern financial components."
Dudley said the new legislation will allow these investment opportunities to be available to the University without obtaining special permission from the governor.
The magnitude of the University's $1.5 billion endowment enhances the need for new financial guidelines, Wolfe said.
He praised University's management of its finances and investment and added that "the University and Board are lucky to have such a good finance committee and investment subcommittee who watch over investments."
Wolfe said the primary function of the bill is to enable financial managers to "invest money as insightfully as possible" and protect the University's endowment.
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