"The university takes a long-term approach to the investment strategies used to manage the endowment," McCann wrote. "In 2025, the strategy was impacted by macroeconomic events around tariffs and the US dollar’s decline, but our outlook remains positive for US investments over the long run."

University endowments are pools of money from donors that the institution invests in the market to generate income.

A fixed percentage of that income is spent on things like scholarships, professorships, or new campus buildings, and to cover some operating expenses like salaries and overhead facilities costs. The money left over is then reinvested in the market to grow the endowment’s size in the long term and ensure investments keep pace with inflation.

The weaker performance of MSU's endowment — valued at $4.5 billion — compared to other institutions comes amid a broader budgetary squeeze at the university as it works to reduce its general fund spending by 9% over the next two fiscal years. Faculty and students have expressed consternation around the tangible effects of those cuts, including paused admissions for graduate programs, cancelled study abroad trips and layoffs.

As the Trump administration's cuts to university research funding and restrictions on international enrollment fiscally squeeze institutions across the country, some observers have suggested that they dip into their endowments to cover losses. But financial experts say that's largely impractical: in the vast majority of cases, donors who give money to university endowments stipulate that income generated from their contribution go toward funding specific endeavors, like scholarships, professorships, new campus buildings and research in particular fields. 

Last fiscal year, MSU’s endowment reported stronger returns of 15.1%, outpacing the national average by nearly 4%.

MSU credited those returns at the time to its large holdings in companies listed on U.S. stock exchanges and the strong performance of the hedge fund it invests in.

This time around, the TIFF report states, the top-performing endowments were buoyed by their large holdings in private equity — usually making up a third of all investments. The most recent information in MSU’s endowment portfolio, published June 30, 2023, indicates that MSU has 31% of its common investment fund allocated to private investments, which include private equity and venture capital.

Last year, the strong performance of MSU’s endowment came amid sustained criticism from campus activists of its investments tied to Israel and weapons manufacturers. The university has long insisted its primary consideration in endowment investments is how well they’ll perform financially, though advocates have argued MSU should give more weight to the political implications of its investments.

In December 2024, the Board of Trustees voted to establish a presidentially appointed committee of students, staff and faculty to make non-binding recommendations to university leadership about the "non-financial" concerns over particular investments. That move was decried by activists as a bad-faith attempt at placating them that won’t bring about the divestment they've pushed for.