The Board of Visitor’s Finance Committee reviewed the University’s endowment — including recent growth underperformance and a decision against divestment after a student referendum in the spring — along with approving updates to the 2023 six-year institutional plan and biennial budget funding requests during its Friday meeting. The state-required six-year plan builds upon the University’s larger goals to strengthen its foundation and grow as a community of service and learning.
UVIMCO, the University’s Investment Management Company, oversees investment of the University’s roughly $14 billion endowment. The University ranked among the top 15 universities by endowment in the 2023 U.S. News and World Report.
The endowment has underperformed recently, falling below an anticipated eight percent return, UVIMCO Chief Executive Officer Robert Durden reported. The long-term pool — a set of long-term endowment investments — came in at 7.5 percent this year and 1.5 percent over the last three years.
Despite stagnancy in recent years, endowment numbers are on track across the past five, 10 and 20 years. Durden said that while UVIMCO typically invests in smaller, mid-cap companies, current areas of focus include liquid equities, reducing exposure to underperforming Chinese markets and expanding engagement on Artificial Intelligence investments given new gains.
“No guarantee that that [return] will change anytime soon, but given enough time, we're very confident in it,” Durden said. “It's been a difficult investment environment as well.”
Chief Operation Officer J.J. Davis affirmed the University’s overall strong financial position and said the University ranks as one of only four public universities to receive a AAA bond rating — reflecting a high creditworthiness based on their past loan repayments — across all three major rating agencies.
UVIMCO has also faced tension over recent calls to divest, with students passing a nonbinding referendum in the spring calling on the company to submit itself to an external audit and divest from companies engaging in or profiting from “the state of Israel’s apartheid regime.” Nearly 8,000 students voted, and just under 68 percent approved. UVIMCO Chief Operating Officer Kristina Alimard confirmed that the organization will not divest from any investments in response to the referendum.
“Our primary objective is to generate strong adjusted returns for the University of Virginia,” Alimard said. “We do not utilize divestment or negative screens for non-financial reasons.”
Despite this refusal, many faculty agree with the student referendum, according to Faculty Representative Michael Kennedy. He asked whether divestment is something UVIMCO won’t do or is simply unable to do.
Durden said he sees the decision as a combination of the two factors. UVIMCO works with around 85 external managers and doesn’t have perfect visibility into each one’s underlying positions, he said, adding that some agreements would be difficult to renegotiate.
Durden also noted uncertainty in state law over non-financial investment considerations. Virginia Attorney General Jason Miyares previously condemned the University’s student referendum as antisemitic. The governor’s office later asked public colleges and universities to verify that investments are unrelated to social or political interests, per a letter obtained by Cardinal News in July.
“We do not like using our investment strategy as a means of expressing a moral or political opinion,” Durden said.
In terms of action items, the Board passed required updates to the 45-page six-year institutional plan with a focus on expanded financial aid access, pan-university research and academic programs at Wise. The state requires changes to be finalized by Oct.1.
The Committee also discussed undergraduate tuition rates. With undergraduate tuition set last winter for an approximate 3 percent increase over the next two years, the Board will consider changes to graduate tuition this December. The balance of keeping tuition as low as possible in addition to growing in areas like faculty pay presents a unique challenge for the University, as Davis has discussed in earlier Board meetings, including a Finance Committee meeting in November. Davis said the Commonwealth contributed around $6.7 million to support three percent compensation increases back in May.
“Please note the expectation is the vast majority of the other costs are to be borne by things like tuition increases,” Davis said. “So we will have, obviously, a robust discussion as we move forward over that. It does put incredible pressure on the system, particularly as we are limiting tuition less than the rate of compensation increases historically.”
In a move that Chair Robert Blue said essentially codifies existing processes, Board members approved a new finance sub-committee responsible for reviewing President Jim Ryan’s performance and advising on compensation for senior executives. Blue clarified that the sub-committee will still make a final recommendation to the full Board, and has a say in pay across both the academic and health systems.
The Committee also updated operating and capital requests within the biennial budget, a two year funding plan approved by the governor.
Within the biennial budget’s funding list, the Committee requested $20.5 million over the next two fiscal years for the University’s Health Insurance Plan premium costs.
“We are self insured, however, we do ask for the proportionate increase of our employees,” Davis said. “We have been unsuccessful in past years over this but we don't stop trying. It's a pretty big number for us.”
The next largest requests, at a combined $15,817,268, will go toward the Virginia Military Survivors and Dependents Education Program that saw a rise from 36 waivers approved in 2019 to 227 in 2017 — an increase of $6.3 million in demand. The plan provides education benefits for spouses and children of veterans and military service members who were killed in action, declared missing or are considered 90 percent disabled, according to the University’s VMSDEP website.
$2.9 million of the budget will go towards mental health services, including finalizing the fourth floor of the Student Health and Wellness building to increase offerings.
An expansion of the University’s Threat Assessment team, the body responsible for performing violence prevention policies and procedures, requests a total of $368,377 across the next two fiscal years. The team saw cases increase by 75% over the past two years — from 199 to 348 — according to the Committee book. The money would increase training and add two additional team members, a change that Davis said is “not optional” even if requested funding does not come through.
“I think it’s something essential, as opposed to nice to have,” Davis said.
The Board also targeted safety and security with an expanded contract for centralized building access control through Acme Technical Group, a company which helps provide building access services for the University at present. The building access control system allows administrators to remotely lock down physical buildings in an emergency.
Three other new or expanded contracts within the Medical Center each exceed $5 million dollars, including a $16 million agreement with Johnson & Johnson to provide trauma products.
The Board heard an additional report on Strategic Investment Fund performance, a measure of accumulated interest based on UVIMCO performance, which now sits around $1.7 billion. The SIF serves as a pool for strategic investments, particularly those relating to the University's 2030 comprehensive plan.
Ryan said the SIF has funded a total of 700 new scholarship endowments worth $650 million and created over 130 professorships valued at $520 million. Among these are 10 professorships pegged at $10 million a piece that allow professors to make an impact across schools — a key move given outside ratings that list recruitment and retention as a risk factor for the University’s financial standing.
“This is meant to bring in or retain the true superstars, those who are not only going to have an impact in their schools, but an impact across the University and going to attract other scholars as well,” Ryan said.
SIF funding and donations have already contributed $1 billion to the endowment since its inception in 2016, Ryan reported.
“Anytime we add to the endowment for financial aid, we are easing pressure on tuition,” Ryan said.
Several Board members, however, raised questions about a lack of Board oversight on SIF expenditures. Representative Rachel Sheridan requested more metrics on the fund along with another audit — the last was conducted in 2016.
The Finance Committee will reconvene at the Board’s December meeting. There, members will approve graduate tuition changes and possibly consider a debt shelf registration that would pre-authorize strategic investments as the market fluctuates.
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