When the economy took a turn for the worse in fall 2008, Miami University investments took a hit along with it. Now, the economy is in recovery mode and Miami's investment portfolio is following suit.
In fiscal year (FY) 2009, Miami's return rate on investments was negative 22.5 percent, according to Chief Investment Officer Bruce Guiot.
That negative return rate caused a shuffle of funds so Miami could offset the loss of financial aid and scholarships. Scholarships are the largest recipient of Miami's endowment contributions. Approximately 48 percent went towards scholarships last year — consistently about a 4.5 percent payout rate — according to Guiot.
To offset the decline, Guiot said the university increased its contributions to financial aid and scholarships in the past few years.
Typically, Miami investment rates of return run with Harvard University, Yale University, Dartmouth College and Georgetown University, schools with large assets and positive return rates year-to-yearbased on National Association of College and University Business Officers (NACUBO) data. Return rates refer to endowment pools and foundation pools combined, Guiot said. Non-endowment and separately-held funds are invested differently and are therefore not reported to NACUBO.
Miami's investment portfolio hit a high point Oct. 31, 2007 when the pool was $429 million. In turn, Miami's return rates ranked 57 of 726 in the annual endowment study by the NACUBO for FY 2007.
Since its high, Miami's investment portfolio quickly decreased until Feb. 28, 2009, when the investment pool fell to a low point of $287 million.
NACUBO rankings had Miami return rates in the bottom quartile for FY 09, according to Guiot.
This year, Guiot said Miami ranked 234 of the total 825 participating schools' return rates in the NACUBO annual endowment study for FY 2010.
Total investments are comprised of endowments (typically restricted funds), non-endowments (essentially the university's checking account), foundation funds and the independently managed gifts such as trusts, annuities and separately invested assets.
Miami's asset size as of Jan. 31, 2010 was $394 million and as of June 30, 2010 was $345.5 million with a combined rate of return on investments of positive 13.5 percent, a steep increase from FY 09's rate of return at negative 22.5 percent, according to Guiot.
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In the future, Guiot said he hopes for Miami to have an annual rate of return between 8 and 12 percent.
"Anything about (5.5 percent), and we're doing well," Guiot said.
In light of the financial crisis, the state of Ohio and the federal government responded by helping higher education.
Ohio tuition froze and made progress toward the national average. In addition, the Ohio College Opportunity Grant was eliminated for community college students because of the federal financial aid increase of the Pell Grant.
The University System of Ohio and Board of Regents Press Secretary Rob Evans said no institution in Ohio fell close to the1.75 rating for fiscal trouble in accordance with the Board of Regent's campus accountability description. A score of 1.75 or less out of 5 for two consecutive years puts an institution on fiscal watch, according to the same source.
"Everybody just hunkered down and rode out the storm," Evans said.
Guiot said the state would be distributing 11 payments rather than 12 for FY 2011. Guiot said Miami could see at least some of the 12th payment depending on the governor's budget plans.
"Things are a lot better than they were back then," Guiot said. "When you look at (Miami's) total revenue, the vast majority is coming from tuition."
Guiot said while it hurts for the state to reduce the subsidy, it's more about the ability for students and parents to afford the tuition and the retention rates.
Guiot is optimistic for Miami's investment portfolio for FY 2011.
He said for the first half of FY 2011 the return rate is 13.5 percent. That number matches the return rate for FY 2010.
Evans said the outlook for FY 2010 is positive across the state's public institutions but was less optimistic about the state itself.
"I haven't heard from any campus yet that they're looking at worse revenue pictures after because things have really started to turn around and while those portfolios may be real sensitive to downturn, they're real sensitive to acceleration," he said. "The state's revenues lag a little more and fell just about as fast … It's going to be a while before Ohio gets close to the revenue we were at in 2008."
To view Miami's annual investment report, click here.
Correction by the editor: 13.5 percent return rate was for July 1 to Dec. 31 (not Jan 31, 2011)
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