USU invests donations
Money donated to Utah State University is being invested wisely, according to one investment specialist.
Dereck Ray of Merrill Lynch said he supports USU’s position of long-term investing and diversification.
Money received by USU from private donations and other sources is invested in various places for later use. Lynn James, associate vice president for Administrative Services, said the money is split into two categories.
The first part is the Cash Management Investment Pool. The pool is mostly university revenue and donors’ funds, worth about $122 million.
The pool is invested in liquid growth in the money markets and grew approximately 6 percent last year, James said.
The second part is the Endowment Funds from donors, worth approximately $79 million dollars, which is used principally for long-term investing. The endowment is the principal money-making tool for USU investments. Some of the growth and earnings are spent by USU, while the principal isn’t spent, James said.
The endowment is invested in common and preferred stock, bonds (both U.S. and private), mutual funds and cash investments, he said.
James said while the markets have fluctuated over the past four years, the endowment maintains an annual growth rate of 10 to 11 percent on average, which is normal.
Ray said long-term investments are the best course for security and growth. He said investing for long-term growth in stocks is desirable even through historical down points like the Great Depression and other recessions.
If one were to invest $1 into stocks in 1926, “that same dollar now is worth over $1,000,” Ray said. “Over time you get greater reward from investing in the stock market,” compared to investing in bonds and cash that grow steadily, but are not as profitable in the long term as stocks.
Ray said diversification in the market is also the smart way to invest, because some part of the market is always growing. He said that’s why investing broadly in the market in various mutual funds like USU is doing is smart.
Ray also supported short-term investing in steady growth, like bonds, and money markets, like the Cash Management Investment Pool, because there are no fluctuations and growth is virtually guaranteed.
James said USU’s wide variety of investments guarantees growth of the Endowment Fund because USU is investing for the long haul.
“You still know you are not going to have to sell when the market is down,” James said.
Morningstar Principia, which tracked overall market performance from 1999 to 2000, measured the yearly growth rates of stocks, bonds and cash. Though market segments may be up or down in any one year, there is always a market segment that is up, according to the measurements.
In 2000, when U.S. company growth and value stock were generally down, diversified portfolios like USU’s still earned on U.S. government bonds, up 20.28 percent, and municipal bonds, up 11.69 percent, according to Morningstar Principia.