The N.C. State Investment Fund experienced an 11.9 percent return on investment for the past year, which ended on June 30, and a 9.7 percent return for the past three years. During fiscal years 2008 and 2009, the investment returns were negative.
Mary Peloquin-Dodd, associate vice chancellor for finance and business and University treasurer, said this performance is consistent with a lot of other large university endowments in the United States, and it’s due to a partnership with UNC Management Company and better market performance.
The N.C. State Investment Fund’s portfolio includes real estate, private equities, energy and natural resources, long-biased equity, and long-short equity.
“The major change in our investment strategy over the past ten years is that we began investing with UNC Management Company, roughly three and a half years ago or four years ago,” Peloquin-Dodd said. “They had a good 10 year performance, and it’s a diversified portfolio.”
Most of N.C. State’s endowment fund is scattered in different organizations across the University, Peloquin-Dodd said. Many of these organizations invest in the N.C. State Investment Fund, which is a university-controlled fund. It makes decisions about where to invest based on performance and risk.
UNC Management Company, Inc. is a 501(c)(3) nonprofit and was established in 2003 to provide investment services to The University of North Carolina at Chapel Hill and other UNC System schools. The company also manages the UNC Investment Fund, LLC.
Peloquin-Dodd said growth of the endowment comes from both gifts and investment performance. In the three years of Chancellor Randy Woodson’s tenure, the endowment has increased from less than $400 million to $764.9 million, as of June 30.
“Endowment growth depends on the year, although since Chancellor Woodson has come to the University, more of the growth has come from gifts to the University and its associated entities,” Peloquin-Dodd said. “I know that philanthropy is a huge part of the growth. The University is raising money from year to year. Not every year is consistent for investment performance.”
Earlier this year, the National Association of College and University Business Officers unveiled its preliminary results for endowment performance for the year that ended in June. It found that smaller endowments (less than $1 billion) performed far better than their larger counterparts.
“The long success of the Yale model underlies the conventional wisdom that a top-performing endowment has to be big (over $1 billion), heavily invested in costly alternative strategies like hedge funds and private equity, and managed by a large and sophisticated staff of internal investment professionals,” The New York Times reported.
Peloquin-Dodd said smaller endowments with more exposure to domestic — or U.S.-based — equities may have performed better in fiscal 2013 because more of their investments are concentrated in an asset class that had better performance for the fiscal year, i.e. domestic stocks.
“Ours is more diversified,” Peloquin-Dodd said. “We diversify to reduce risk. You can look back at the performance of domestic equities to see they don’t always have a good year. One year up could be up 21 percent, another could be down 35 percent.”
For the 12-month period ending on June 30, domestic equities, such as the DOW Jones or the S&P 500, returned an average of nearly 21 percent.
“We have large number of foundations, and each has a board,” Peloquin-Dodd said. “We try to invest most of our endowment assets centrally. So those boards tend to adopt same sort of investment policies, to make it easier on everyone.”
