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Market volatility drives negative return on NU Foundation endowment

Market volatility drives negative return on NU Foundation endowment

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Although it reported broad support that drove fundraising to $320 million last year, the University of Nebraska Foundation reported a net loss on its main $1.3 billion endowment.

The foundation lost 1.3% on Fund A, the largest portion of its investment, the nonprofit said in its annual report, after projecting 0.1% growth as a benchmark for the 2019-20 fiscal year.

Despite trade tensions between the United States and China in the last half of 2019 that created some volatility in the markets, the NU Foundation saw "solid results" in its investments.

"However, beginning in March of 2020, the economic impact of the emerging COVID-19 pandemic rapidly disrupted markets and reintroduced volatility, ultimately leading to steep declines in stocks and other risk assets," the NU Foundation said in its annual report.

Commodities suffered "precipitous price declines" across the board, particularly in crude oil, the foundation added, while real estate prices suffered amid fears of future commercial demand amid widespread efforts to work from home.

The down year isn't likely to affect day-to-day operations across NU, because payouts to university departments that receive endowed funds are based upon a five-year rolling average of those investments.

"In the short term, we won't see much of an impact, but if it becomes a long-term trend, then it becomes more concerning," said Chris Kabourek, the NU system's chief financial officer.

But, Kabourek added, the university and its foundation also see the need for improvement.

According to its annual report, the NU Foundation's investments in Fund A were below the three-year and five-year benchmarks set by its investment managers.

While it set a benchmark of 4.6% for its three-year annualized earnings, the foundation returned only 3.3%. Compared with the five-year benchmark of 4.7%, the foundation realized just a 3.7% gain.

"The performance the last five years has been underwhelming," Kabourek said. "The University of Nebraska Foundation recognizes this and has made changes in the past year with an eye on improving performance."

The 10-year return of 6.7% exceeded the 6.5% benchmark, however, which Kabourek said was encouraging.

The NU Foundation oversees $2.6 billion in assets, including $1.7 billion in endowed funds.

Reach the writer at 402-473-7120 or cdunker@journalstar.com.

On Twitter @ChrisDunkerLJS

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