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NU Foundation cuts ties with many financial firms after disappointing returns on investment

NU Foundation cuts ties with many financial firms after disappointing returns on investment

  • Updated

The University of Nebraska Foundation dumped 23 of its money management firms over the past year, including six last week, because of disappointing returns on investments.

Foundation spokeswoman Dorothy Endacott said a total of 84 outside firms helped lend expertise to the foundation’s investments before the firings.

Ten more firms will be relieved of their duties as the foundation moves away from hedge funds, she said.

Including its main endowment and some smaller pools of money, the NU Foundation counts its total endowment at $1.7 billion, the 23rd largest in the country among public universities.

The foundation said the return on its main endowment has been a solid 8.2% since its inception in 1989.

The foundation expressed disappointment in the negative return — minus 1.3% — on its main endowment in the budget year 2020, which ended at midyear. That endowment has a value of $1.27 billion and contributes to many items throughout the NU system including scholarships, research, faculty support and academic programs.

The foundation announced in a press release this week that it took in a record $320.4 million in commitments in fiscal 2020 — $30 million more than the previous year — and that 53,355 people and organizations donated in 2019-20.

Pensions & Investments, a publication that tracks college endowments, said that as of midweek, it had collected results this quarter from 26 endowment funds.

The NU Foundation’s performed the second-worst in 2019-20, better than only the University of Illinois Foundation’s minus 2.5%, the publication reported.

Endacott said results over the long term are more important than those over a year.

But the Pensions & Investments listings showed that NU’s return after five years was 3.7%, the worst of 19 listed.

Seven of the 26 did not report five-year results.

“We are not hitting our target,” Endacott said. The annual report lists a goal of at least a 6% return over five years.

The foundation also replaced its primary investment consultant, Boston-based Cambridge Associates, with Canada-based Pavilion.

The foundation has changed its investment strategy to focus on “low-cost index options,” reducing commodity exposure and other things. Index options consider the performance of an index such as the S&P 500.

Endacott said the decline in 2019-20 doesn’t mean that there was a drop of 1.3% in allocations from the foundation to the NU system. The foundation makes those allocations based on the average of the past five years so that they aren’t affected by aberrations from year to year.

Endacott said measures of return on investment can vary widely depending on the snapshot in time in which they are taken. She said the foundation’s returns for the year ending on Dec. 31, 2019, were an excellent 18.4%.

But she left no doubt about the foundation’s disappointment in its recent returns.

“We’re not pleased with the short-term performance, and I would say the short term is one-year, three-year and five-year.”

That is why, she said, “we are taking some very active steps” to improve.

Our best staff images of October 2020, 402-444-1123

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