With billions in assets, two investment funds play a significant role in U of T’s operations. This massive amount of assets is carefully managed by two crucial yet obscure financial entities: the University of Toronto Asset Management Corporation (UTAM) and the University Pension Plan (UPP). While both play an important role in managing the investing strategies of large funds, they pursue fundamentally different goals.
What is UTAM?
Formed on April 25, 2000, UTAM is an organization focused on investment management that aims to produce significant investment returns and support U of T’s dedication to research and education. One of UTAM’s main financial pools is the Endowment Portfolio, which consists of donations from individuals and corporations. Another pool is the Expendable Funds Investment Pool (EFIP), which manages the university’s short-term assets — economic resources that can be converted into cash and generate value quickly, typically in a year.
The funds in the Endowment Portfolio are invested in the Long-Term Capital Appreciation Pool (LTCAP). This annual payout on the endowment supports teaching and research initiatives that are consistent with the university priorities the donor has agreed to support. Donated gifts, which include cash, securities, and properties, are immediately directed into the U of T’s Long-Term Capital Appreciation Pool (LTACP).
Funds in this pool are invested through UTAM in a diversified strategy managed by third-party investment managers. Selected managers choose securities or other investments according to the strategies that UTAM has engaged them to implement.
The EFIP contains expendable funds that are pooled and invested until spent. It includes the University’s unspent cash from operations, capital projects, ancillary operations, expendable donations, expendable payouts from endowments, and research grants. These funds are invested in short- and medium-term strategies to generate investment income that goes towards supporting the university’s teaching and research mission. Given the shorter-term horizon, the returns on EFIP are typically lower than the long-term investments in LTCAP.
What is the UPP?
The UPP is an Ontario-wide fund created to ensure the security of the retirement plans of employees at its five Ontario member universities and 14 affiliated organizations. It is a Jointly Sponsored Pension Plan, which means both employees and employers have equal responsibility when it comes to making decisions about the fund and contributing to its assets. Over 41,000 members — among them employees of Ontario’s largest universities, including U of T, Queen’s, and Guelph — are included in the UPP, providing them with high-quality pensions.
Employees’ annual contributions to their pension funds managed at UPP are calculated based on a benchmark known as the Year’s Additional Maximum Pension Earnings (YAMPE). 9.2 per cent of an employee’s earnings below this value and 11.5 per cent of earnings above this value must be contributed yearly to their pension fund. Employers will fully match this contribution.
How these funds have helped the U of T community
Through money donated in the 2023–2024 fiscal year by many U of T donors, $1.05 billion was invested into establishing more research chairs and professorships. Professor Anatole von Lilienfeld, who researches the discovery of transformative materials using AI, was the recipient of one of these grants.
In a report from UTAM, von Lilienfeld stated that, “this generous endowment has been the catalyst for groundbreaking advancements at the intersection of materials science and AI.” Development in this area can contribute to overall economic growth and support sustainable production, infrastructure, and healthcare.
Similarly, the UPP has demonstrated impressive achievements in recent years, shown through their Defined Benefit (DB) pension plans. Members of these plans receive a guaranteed monthly income protected from inflation once they retire. DB pension plans make people more confident about having a secure source of income when retired, and thus, they are more inclined to spend money.
Increased consumer confidence due to these pension plans has resulted in tangible increases to consumption in local economies — consumption growth due to DB pension plans supports 250,000 full-time jobs annually, while generating over $16 billion in labour income and $34 billion for Ontario’s gross domestic product (GDP).
Additionally, UPP has partnered with WPT Capital Advisors, an investment advisory specializing in real estate, to invest in more assets that can drive the growth of its funds without resulting in further inflation. The fund will acquire various warehouses across the US supply chains to gain access to such assets and ensure its portfolio’s stability.
While both UTAM and UPP make significant contributions to the financial management of U of T, both operate in vastly distinct manners, working independently to govern and efficiently handle the billions of dollars the university receives.
Correction: This article was corrected to reflect that UTAM and UPP are independent entities. The article was also corrected to reflect an accurate description of the EFIP, and that it generates income separately from the LTCAP.
