Despite economy, Pitt endowment fund holding on

From New York City to London, investors are burying their heads in their hands, stressing over… From New York City to London, investors are burying their heads in their hands, stressing over the still-slumping stock market and the effects it has on the world economy. Investors at Pitt are doing the same thing. And their decisions could influence anything from the cost of tuition to the construction of a new dorm. In recent months, the stock market has plummeted. While Pitt spokesman John Fedele said the University does not track the stocks on a daily basis, a continued drop in the market could mean Pitt students will feel the results. Pitt, which has a $2.3 billion endowment that ranks among the top 10 in public universities in the country, has to be just as careful with its investments as any company or family. In its last fiscal year, which lasted July 1, 2007, through June 30, 2008, the University had no losses or gains. This goes against Pitt’s recent trend of investment success. Over the last three years, Pitt has made 11.4 percent on its investments to help increase the endowment. But some people, like Pitt sophomore Titilope Akinlose, don’t understand what the endowment is. ‘No idea,’ said Akinlose. ‘I’ve never even heard of it.’ Pitt spokesman John Fedele summed it up best. ‘Think of it as a safety net for the University,’ said Fedele. The endowment consists of all of the University’s savings and assets, which are spread around into separate investment pools. In the last decade, the endowment has helped to steadily increase scholarships, fellowships, chairs and professors. It also helps to bring about new construction and projects. There are 398 more endowed scholarships today than there were in 1997. The endowment fuels the University, Fedele said. And unless the endowment grows, these things could be cut. Pitt’s endowment grew steadily in the last five years because of two main factors, Fedele said. The first way the endowment can make money is from successful investments. The second means of expansion is Pitt’s capital campaign, which is showing steady success and is a big part of Pitt’s plan for the future. Fedele said Pitt hopes the capital campaign, which promotes donations and other ways of fundraising, will raise $2 billion. Still, much of the endowment relies on successful investments. Roughly 18 percent ‘mdash; or about $41 million ‘mdash; of the endowment is invested into marketable alternatives, while 20 percent is invested in domestic equity. Domestic equity is described as stocks in U.S. companies. Investments like these are the ones that have been up and down recently ‘mdash; not just for Pitt ‘mdash; but for people all across the country. Fedele said the University does not track the stocks week by week, so he could not comment on the amount of money Pitt lost or gained in the past month. Still, he said the market was not looking good. To avoid the chance of losing large sums of money with the market in its current state, Pitt’s plan has been one of market diversity. And according to Sara Moeller, an associate professor of business at Pitt, there are still some safe bets in the market. ‘It’s not like all things are down,’ said Moeller. ‘There are still some places you can invest that can get you guaranteed return.’ Some of these include bonds and certificates of deposit, which are commonly referred to as CDs, and they give the purchaser an expected rate of return that is generally guaranteed. Ten percent of the University’s current investments lay in fixed income. Because the endowment acts as a safety net, the University is generally not allowed to dip into the endowment to start new projects. So that means the money that it makes off of investments or donations become all the more crucial. For example, if Pitt makes a 10 percent profit on a $500,000 investment, it’ll have $50,000 that could go to use for a new project. That money could be distributed in any number of ways. Still, it’s money that can be used. But if the investment makes no money, it can’t be touched. ‘[The University] can’t allow for the principle to go down,’ said Fedele. For the most part, the money has been there for new projects. But economist Chris Briem, who does research at Pitt’s Center for Social and Urban Research, said that even if the endowment is making money, it’s not making nearly as much as it would be if the market were growing. He added that the cuts the University might have to make after a loss of money translates to what happens to the city in general. Briem said job loss in addition to business failures and less building are all common effects of money loss. While Moeller said there are some investments that can be safe, she added that making strong investments these days is difficult. And if a certain investor is looking to make a lot of money off of an investment, it needs to be willing to take some risks. ‘The higher the risk, the higher the return,’ said Moeller. ‘The risk allows the bigger return. But you have to worry about losing [money], too.’