How does an endowment strengthen the University of Manitoba?
The University Investment Trust (UIT) – The endowment is a key contributor to ensuring the university is successful in achieving its goals and objectives. Since the end of fiscal 2000, the endowment has grown from $144 million to the current value of $307 million. On top of that, there are trust and endowment funds outside of the UIT that also support various activities. Due to donor’s wishes or liquidity requirements, these funds are invested in fixed income instruments. The value of these funds is currently $35 million. The ongoing growth of the endowment fund creates a foundation that will help finance the many facets of the university on a continual basis, and more importantly, ensure that both current students and future students will be able to benefit from this support. 

What is an endowment and what does it support?
An endowment fund is a pool of investments that underlie individual endowment accounts that support a wide variety of needs at the university. When a donor makes a gift to the university, those funds are invested in perpetuity (i.e., the original gift [capital] is invested and is not to be spent) and the income earned on these investments is allocated on an annual basis to support the designated beneficiary of the donor. These allocations support students through scholarships, bursaries and awards; they support faculties by funding operating and academic expenses; they support teaching through chairs and professorships; and they also support research, athletics, libraries, new buildings and other capital projects. Some donations are designated as unrestricted, allowing the university to use those funds in the areas that need it most. Whatever the cause, the endowment fund is an integral part of the university in terms of funding strategic priorities.

What is the difference between a trust fund and endowment fund?
Trust funds are segregated accounts that may encroach on capital to fulfill the purpose of the fund as defined in the terms of reference. Endowment funds are segregated accounts in which the capital is invested in perpetuity and only the income is available to fulfill the purpose of the fund as defined in the terms of reference.

When will an endowment start to provide funding?
An endowed account will start to provide funding in the fiscal year following the calendar year in which the gift is made. How much funding is available depends on when the donation was made and how long it was invested. For example, if a donor makes a gift on July 1, 2008, it will be in the endowment for six months before the December 31, 2008 calendar end date. The following fiscal year of the university begins April 1, 2009, and there will be funding available at that time. It is important to note that this donation was only in the endowment for half of the calendar year, so only one-half of the funding will be available in the following fiscal year. In years after that, a full year’s funding will be available.

Are endowments subject to any fees?
The underlying investments of the endowment are subject to investment management fees, custodial fees, consulting fees, performance measurement fees and internal charges. This is typical of any endowment fund. The University of Manitoba’s endowment funds have some of the lowest fees of any large university endowment fund in Canada, with total fees ranging between 25 and 35 basis points, or not even one-half of 1%. These fees will not be static, and can increase or decrease depending on what assets make up the endowment portfolio and how those assets are managed.

How is an endowment payout amount established?
The endowment payout is determined by the expected real return of the assets over the long term. Real return is the rate of return the assets earn, adjusted for inflation. This is an important point as the endowment must keep up with inflation to ensure the capital is preserved and that current and future students receive equitable support. The long-term expected rate of return on the endowment’s assets, adjusted for inflation, has resulted in a 4.5% spending rate. This rate is reviewed annually to ensure it is still realistic given the long-term outlook of the endowment fund investments.

How are endowment proceeds distributed?
Each individual endowed account receives 4.5% of the three-year moving average market value of their proportionate interest in the underlying investments of the endowment fund. A three-year moving average smoothes the inevitable fluctuations of the investment marketplace in any one year. Since the endowment fund is a unitized investment pool, an individual endowed account’s share of the endowment is determined by the number of units “owned” by the account compared to the total number of units in the pool.

How has the UIT addressed market risk?
Market risk has been addressed a number of ways, including investment guidelines which restrict UIT holdings in any one company. Equity portfolios, for example, must include a minimum number of companies which statistically have proven to reduce risk, and restrictions have been established to limit the investment in securities of a single corporation.

What is the reporting process on the UIT throughout the year?
The Investment Committee meets approximately every two months, which includes a meeting at least once or twice a year with AMI Partners and Commonfund to review investment performance, the strategy and outlook for investments of the UIT. Investment managers also provide written quarterly reports on UIT performance to the committee, along with updates on staff changes which might affect portfolio management. Within the Specific Trusts, investments are limited to the fixed income securities market as discussed above. Most investing of Specific Trusts, however, is done internally with the exception of a few accounts, which were set up with designated portfolio managers many years ago. The Vice-President (Administration) also makes quarterly reports on asset mix and performance to the Finance and Administration Committee and the Board of Governors.

If you would like more information on the UIT, the University of Manitoba provides a quarterly newsletter online. As well, the Trust and Endowment Fund, which includes both the UIT and Specific Trusts, is reported in the annual audited financial statements of the university. You may also contact Lance McKinley, Manager of Treasury Services at (204) 474-9440.