University Times

The Pitt Board of Trustees investment committee has approved revisions to the asset allocation policy for the University’s endowment fund, changing a policy that was adopted in June 2006.

Based on portfolio analyses by the University’s investment staff and its consultants Wilshire Associates and Cambridge Associates, the committee voted June 16 to adjust the target allocations and permissible allocation ranges for several asset classes.

The committee:

• Increased the permissible allocation to the “marketable alternatives” category, setting a target allocation of 18 percent of the endowment’s market value and a range of 13-23 percent. The move increases the allowed allocation by 3 percent of the endowment’s total market value.

• Decreased the target percentage for the domestic equity and international equity asset classes. The new target allocation for domestic equity is 20 percent of the endowment’s market value with a range of 15-25 percent, cutting the permissible allocation by 2 percent of the total market value. The new target allocation for international equity is 17 percent with a range of 12-22 percent, decreasing the permissible allocation by 1 percent of the total market value.

The committee also approved a change in the endowment fund investment pool asset class definitions to rename inflation assets “real assets” and to modify the definition of the asset class to emphasize a focus on physical or identifiable assets.

The new definition identifies real assets as “physical or identifiable assets, as well as financial assets whose income streams and/or market values tend to rise with inflation. Real assets include real estate, natural resources (e.g., oil and gas, timber and other commodities) as well as inflation-indexed bonds.”

University bylaws give the investment committee authority to approve investment guidelines and objectives.

Pitt’s fiscal year 2007 consolidated balance sheet valued the University’s endowment at $2.27 billion at the June 30, 2007, end of the fiscal year. An annual ranking by the National Association of College and University Business Officers (NACUBO) of the value of the endowments of 785 colleges and universities in the United States and Canada placed Pitt at No. 28 on the list. (The NACUBO survey, due to differences in reporting, valued Pitt’s endowment at $2.25 billion.)

The University’s endowment grew 25 percent from FY06 due mainly to investment gains. (Other factors that impact endowment funds include gifts, management and investment fees and withdrawals to fund operating and capital expenses.)

Comparatively, the average change in endowment fund values among schools in the NACUBO survey between FY06 and FY07 was 18.4 percent.

Pitt’s endowment fund posted investment returns of 21.52 percent after fees in FY07, outpacing the NACUBO average of 17.2 percent.

Over the longer term, Pitt’s endowment investments also have fared better than average, earning an average 10-year compounded rate of return of 9.37 percent, while the NACUBO average was 8.6 percent. (See Feb. 7, 2008, University Times.)

—Kimberly K. Barlow