2016 Consolidated Endowment Fund Report

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In 1905, the University received its first cash endowed gift of $400, the Philo Sherman Bennett Endowed Prize. This endowment, as well as the bulk of the University’s endowments, invests in the Consolidated Endowment Fund (CEF). Though distinct in purpose or restriction, endowed funds are commingled in the CEF and tracked with unit accounting much like a large mutual fund. Endowed gifts are exchanged for units that represent a claim on a portion of the entire CEF.

Since the initial cash gift, the value of the CEF has grown to $3.0 billion as of June 30, 2016.

Endowment Growth over the last 20 fiscal years

Value of the endowment FY 1996-2016 ($ in millions)

ENDOWMENT FOCAL POINTS

Fiscal Year 2016

143 new endowment funds were created
Distributed $113 million in endowed program support
Returned -1.6 percent

Fiscal Years 2007–2016

2,258 new endowments were created
Distributed $870 million in endowed program support
Earned an annualized average return of 5.6 percent

	Fiscal Year
	2012	2013	2014	2015	2016
Market Value (in millions)	$2,111	$2,347	$2,833	$3,076	$2,968
Return	-0.9%	13.5%	15.8%	6.8%	-1.6%
Number of endowments	3,782	3,982	4,211	4,363	4,506
Distributions to campus (in millions)	$85	$87	$94	$105	$113

ENDOWMENT GIFTS AT WORK

At the end of fiscal year 2016, approximately $113 million in endowment distributions significantly advanced research and education across our campuses. Scholarships and fellowships constitute the largest number of individual endowments established by supporters. While details of these scholarships differ, they share the universal goal of expanding access to a life-changing University of Washington education.

While student funds are the largest category of endowed funds, individual endowments support and drive all aspects of the University’s mission from facilitating faculty and student research, to supporting athletics programs, to creating a healthier tomorrow for Washington and the world. These are just few of the thousands of stories endowment gifts make possible every single year.

Creating a world of good, fueling faculty achievement and boosting student aspirations; that is exactly what UW Tacoma endowments are doing for students and faculty.

“Mom, I knew I was smart.” Learn how a daughter’s learning disability inspired a family of diehard Huskies to ensure all UW student-athletes have every academic advantage.

College of the Environment endowments are creating hands-on learning opportunities and attracting students committed to making our world more sustainable.

Endowments at UW Medicine support everything from rural physicians to innovative research to unparalleled patient care. At UW Medicine they accelerating hope for Washington and the world.

two men working on an aeronautics project

When Keon Vereen needs to take a breather from his studies in aeronatics and astronautics he turns to another form of science — baking. His creations are helping create community on campus.

A classic legacy of learning helps students research our ancient past, while inspiring students to turn opportunity into action. This incredible legacy has changed the lives of more than 100 students.

ENDOWED PROGRAM SUPPORT BY PURPOSE AND AREA

Generous donor support, coupled with investment returns, resulted in the growth of endowment distributions over the past decade. The impact on students, faculty and programs has been substantial with $870 million distributed over the past 10 years touching every part of campus.

Many unique purposes are supported by the CEF and provide opportunities for students and faculty in their quest for excellence and innovation. The majority of endowments benefit specific departments and programs with approximately 74% are restricted to the donor’s designated purpose. The remaining 26% consists primarily of long-term operating monies invested by policy in the CEF.

Endowment support by area

Endowment support by purpose

ENDOWMENT BY COLLEGE, SCHOOL, AND PROGRAM

Benefiting area	Endowment value at 6/30/16	Number of individual endowments
UW Medicine	609,014,550	932
College of Arts & Sciences	332,462,635	925
College of Engineering	204,552,676	400
Foster School of Business	157,921,232	227
Student Financial Aid	131,862,497	233
Offices of the President and Provost	105,456,429	84
Law School	88,697,949	104
College of the Environment	87,896,184	269
Intercollegiate Athletics	63,366,428	191
University Libraries	43,428,564	91
Graduate School	43,230,281	92
School of Nursing	41,621,765	131
Tacoma Campus	38,364,729	71
Undergraduate Academic Affairs	36,916,019	32
College of Built Environments	34,453,949	114
School of Dentistry	27,480,923	91
School of Social Work	23,134,818	46
College of Education	21,218,511	76
Evans School of Public Policy & Governance	19,322,515	31
School of Pharmacy	18,812,663	65
School of Public Health	17,355,466	87
Health Sciences	15,872,407	4
Office of Research	7,413,840	4
University of Washington Press	6,252,989	16
Information School	6,129,013	46
Bothell Campus	3,894,832	20
Office of Minority Affairs and Diversity	3,534,003	36
CoMotion	4,935,386	2
Finance and Facilities	2,346,745	4
Office of the Vice President of Student Life	1,289,345	14
Educational Outreach	909,422	2
University Advancement	894,656	6
	$2,200,043,421	4,446
Non-University Endowments	37,373,060	57
Operating Funds	730,596,046	3
	$2,968,012,525	4,506

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$870 million distributed over last 10 years and 2496 individual endowments that benefit students

ENDOWMENT SPENDING POLICY AND OBJECTIVES

Spending policies provide a disciplined approach to moving money from the endowment to support the purpose designated by the donor on a foreseeable, consistent basis. Therefore a good spending policy must strike a balance between providing a predictable and stable stream of revenue for current beneficiaries and maintaining the purchasing power of the revenue stream for future beneficiaries. The CEF spending policy, which was set by the Board of Regents on October 21, 2011, is 4% of a 5 year rolling average. An administrative fee of 1% of a five year rolling average supports campus wide fundraising and stewardship activities (0.80%) and offsets the internal cost of managing endowment assets (0.20%).

$100,000 gift invested on July 1, 1996 would have a current value of $178,438 and would have distributed $129,729 in program support over the last 20 years.

Value of a hypothetical $100,000 endowment over 20 fiscal years

A $100,000 gift invested in the CEF 20 years ago would have earned $234,653 in investment returns. A portion of this return would have been distributed to campus, and the remainder reinvested in the CEF. As a result, the endowment’s value at June 30, 2016 of $178,438 exceeds the inflation adjusted value of the initial gift of $153,527. The endowment distributed $156,215 to campus while increasing its purchasing power.

CEF INVESTMENT STRATEGY

The Board of Regents of the University of Washington by statue is vested with responsibility for the management of the properties of the university, including the Consolidated Endowment Fund. In September of 2015, the Board of Regents approved the establishment of an internal investment management company, known as the University of Washington Investment Management Company, or UWINCO. Under the new structure, the UWINCO advisory committee was transitioned into an investment management company advisory board. These changes reflect industry best practices and trends among other peer institutions.

ASSET ALLOCATION

Endowment portfolios are commonly managed around a core set of objectives focused on the need to provide support for endowed programs in perpetuity. The Board of Regents, in conjunction with the UWINCO Board, establishes the policy asset allocation judged to be most appropriate for the University of Washington from a long-term potential return and risk perspective. The policy asset allocation is reviewed annually for its continuing fit with the University’s risk profile and with consideration of the changing dynamics of the capital markets.

The CEF asset allocation includes two clearly defined categories of investments: those which facilitate growth or appreciation (Capital Appreciation), and those which preserve endowment values (Capital Preservation). At June 30, 2016, 77% of the CEF was invested in Capital Appreciation and 23% in Capital Preservation. The UW maintains ample liquidity within Capital Preservation to meet its funding requirements, as well as to take advantage of market dislocations if opportunities arise.

PERFORMANCE

For the fiscal year ending June 30, 2016, the CEF returned -1.6% versus -0.2% for the passive benchmark. The CEF’s Emerging Markets Equity, Developed Markets Equity and Fixed Income strategies drove both absolute and relative under-performance. All other CEF strategies had strong relative performance against their benchmarks. Market conditions were exceptionally tough, particularly during late 2015, when a sluggish Chinese economy and falling energy prices weighed heavily on markets. With the exception of the S&P 500, every major equity index had negative returns in FY2016 and nearly all, including the S&P 500, posted lower returns than FY2015. This lower return trend is expected to continue with the negative to low interest rate environment remaining a major driver of investment performance.

Longer-term, the CEF has consistently maintained solid absolute and relative performance, outperforming both the benchmark and public university peers for the five, 10 and 20-year periods. The 20-year return for the CEF stands at +8.4%.

Performance as of 6/30/2016	1 year	5 year	10 year	20 year
CEF Return	-1.6%	6.5%	5.6%	8.4%
Passive Benchmark (70% MSCI ACWI & 30% BC Government Bond)	-0.2%	5.4%	5.2%	6.2%

8.4% returned over the last 20 years and $2.6 billion in growth over the last 20 years

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This online report on the management of the University’s endowed funds was prepared for donors and other interested parties, a printable version is available here. Reports are also available, upon request, to donors and fund administrators for each of the 4,506 funds in the Consolidated Endowment Fund.

Investments

If you have questions or comments about this report, or would like copies of the Consolidated Endowment Fund investment policies, please contact:

Keith Ferguson

Chief Investment Officer
(206) 685-1822
invest@uw.edu

Barbara Wingerson

Senior Associate Treasurer
(206) 685-1822
bwinger@uw.edu

Endowment Giving

If you would like to receive information on how you can support the University’s programs, please contact:

Connie Kravas

Vice President for University Advancement
(206) 685-1980
ckravas@uw.edu

View & Download Annual CEF Reports

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