Endowment drops, MSU officials say not to worry
MSU is starting to feel the effects of the current economic crisis as the university’s $1.4 billion investment portfolio, the majority of which is endowments, declined by about 10 percent for the quarter that ended Sept. 30.
MSU’s endowment is made up of donations and investments that accumulate interest over time.
Glen Klein, MSU’s director of investments and financial management, said the decline is directly related to the overall decline in the financial market. Although MSU’s portfolio has seen a drop, Klein said there’s no reason to worry yet.
“We have sufficient liquidity to ride out this market downturn, so we don’t expect to realize those losses,” he said. “The way that we build our investment portfolio is with these types of situations in mind so that over the next year or two, if the market continued to go down, we have plans and liquidity to deal with that.”
Fred Poston, MSU’s vice president for finance and operations, said the university has set up an investment portfolio with short-term, mid-term and long-term investments. The long-term investments include equities such as stocks, which are more severely affected when the market experiences a downward trend.
He said the money in the short and mid-term funds isn’t as affected by the economy and thus can help the university ride out difficult times.
“We’re designed so that we can endure a three-year period without anything too terribly noticeable happening,” he said.
Poston said some maintenance on campus would be delayed because of the economy but no major plans will be stalled.
“Of course what’s going to happen is we won’t be able to fix as many things and some of our maintenance will back up a little bit as we go through this period,” he said “But we have enough money to cover that.”
MSU President Lou Anna K. Simon said in times of economic prosperity it’s important to remember that the market will have declines in the future.
“You put together reserve and contingency funds and we’ve done that,” she said. “You have to keep them for this kind of storm. We’ve tried to plan in a way that we minimized vulnerability to shorter-term issues. Now obviously if this lasted for a very long time, everyone is going to be in trouble.”
Bob Thomas, MSU’s director of communications for university advancement, said it will be difficult to gauge the effect of the economy on donations.
“The good news is we have a loyal base of alumni and friends who believe that investing in Michigan State is critical and important,” he said.