The Business Board of U of T’s Governing Council held its first meeting of 2019–2020 on October 7. The board received reports that total assets under management, individual endowment funds, and the total debt policy limit have all increased from last year.
Comprised of 42 members, the Business Board is responsible for monitoring the cost-effectiveness of the university’s investments and for approving its business policies.
Investment performance
Daren Smith, President and Chief Investment Officer of the University of Toronto Asset Management Corporation (UTAM), presented the semi-annual report on investment performance to the board.
UTAM manages the university’s pension funds, the Long-Term Capital Appreciation Pool (LTCAP), and the Expendable Funds Investment Pool (EFIP) on behalf of the university.
The LTCAP primarily consists of endowment funds, as well as some miscellaneous investments made by university-affiliated organizations. The EFIP consists of expendable funds, including “cash for operations, capital projects, ancillary operations, expendable donations, expendable payouts from endowments and research grants.”
Over the past year, the total market value of UTAM’s investments has increased by 6.4 per cent to around $10.38 billion. Of this amount, pension funds comprise $5.3 billion, the LTCAP accounts for around $3.1 billion, and the EFIP completes the remaining $2 billion.
In the first half of 2019, the actual returns of the three portfolios nearly matched their overall five-year benchmarks. All three portfolios have also exceeded UTAM targets for the half-year period.
Over a one-year period, pension and LTCAP actual returns have been at 3.8 per cent each, short of UTAM’s 6.1 per cent target. Return targets for pension and LTCAP are uniformly set at inflation plus four per cent.
Over both the half-year and one-year periods, the actual pension and LTCAP portfolio returns have underperformed against UTAM’s reference portfolio. A reference portfolio is a pre-established breakdown of passive and lower-risk investment allocations into different markets.
UTAM uses it as a comparison to its own active investment management strategy. Smith noted that this underperformance is the result of poorer private market investments. UTAM is not planning on making significant changes to its investment strategies.
Annual endowment financial report
As of April 2019, U of T has over 6,400 individual endowment funds, totalling $2.6 billion market value. This is an increase of about 140 individual funds and $89 million from 2018. Of this increase, $40 million comes from endowed donations and $154 million from investment income; $113 million is subtracted for fees, expenses, and spending allocation.
Each endowment has its own terms and conditions, which define the parameters of how the funds should be allocated and invested, as well as how the investment returns may be spent. The university cannot spend the original capital of donated funds; it can only spend investment returns from these funds.
Net investment returns of endowment funds were 5.2 per cent. This is less than last year’s 6.7 per cent return, and the average return over the last five years of 8.4 per cent. Endowments do not include those made to U of T’s federated colleges or affiliated Toronto School of Theology institutions.
Miscellaneous items
The board received a report on debt policy limit, increasing to $1.71 billion from last year’s $1.57 billion.
The board moved the “Other Business” item of the agenda to the top, allowing four students to address the board.
The students — Sarah Colbourn, Manny Dehan, Ellie Ade Kur, and Lucinda Qu — admonished U of T’s perceived lack of mental health resources and supports following a death at UTSG in September. The students urged U of T to invest more time and resources into mental health services and more open dialogue.
Professor Kelly Hannah-Moffat, U of T’s Vice-President, Human Resources and Equity, told the students that the administration shared their concerns. She cited expansions of counselling services, the formation of a mental health taskforce, and an additional $3 million allocation to support student services.
Disclaimer: Michael Teoh previously served as Volume 139 Business Editor of The Varsity.