Portfolio Manager: UofL Foundation's spending unsustainable

Portfolio Manager: UofL Foundation's spending unsustainable

LOUISVILLE, KY (WAVE) - The University of Louisville's investment and endowment foundation has spent so many of its assets keeping the University growing and going that it's unsustainable, the firm charged with managing its funds' managers told directors Wednesday.

"We're trying to be thoughtful about the ways we raise cash," Cambridge Associates Letitia Johnson told the Board's Finance Committee. "It's just the level. And when you have variable equity markets the way we do, you just get killed."

Overall, the foundation's portfolio has risen in value from $723.7 million in 2006 to $771.2 million 10 years later. But the fluctuating or moveable assets - diversified across stocks, hedge funds, global-emerging market funds, real estate, bonds and cash - has dropped from $673.2 million to $578.9 million in the same period.

The 2008-09 Great Recession took a heavy toll on many colleges' endowments, but such diversification spared UofL a heavier hit than others who invested greater percentages in stocks, Cambridge told the Board.

But the foundation no longer can expect its historic 9.5 percent annualized return dating from 1995. Rather, its funds' collective performance of 6.5 percent since the Recovery began, disappears when factoring inflation and spending. Going forward, expect growth of 3.6 percent per year, Cambridge warned.

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"No one can deny that the Foundation has produced some wonderful outcomes over the last few years," Chair Brucie Moore told the full Board. "Or that the Foundation could have been governed differently."

Lots of the outgo shows buildings devoted to research and to offices for the specialists performing it. The extended Belknap Campus for Engineering and Applied Technology.

"We have to get a better handle on the spending," Board member Dr. Mark Lynn said. "There were a lot of things in play. You've got to remember, it's like turning a huge ship."

State Auditor Mike Harmon delivered a scathing review of Foundation operations, laying much of the blame upon former University President Dr. James Ramsey, who also served as the foundation's president and de facto Chief Operations Officer.

"The finger pointing's done," Lynn said. "We've gotta get the University back on track and moving forward."

Such also would appear to apply to Republican Gov. Matt Bevin, whose reorganization of the University's Board of Trustees drew a thus-far successful challenge from Democratic Attorney General Andy Beshear.

Franklin Circuit Court reversed Bevin's Executive Order, which replaced 17 members who had staggered terms with 10 appointees who met criteria of racial and political balance.

State statute forbids removal of University Trustees without cause or evidentiary hearings. Bevin has asked Kentucky's Supreme Court not to hear a challenge to the lower court's ruling on grounds that the 2017 General Assembly, with Republican super-majorities in both chambers, will render the ruling moot.

The Southern Association of Colleges and Schools (SACS) has cited Bevin's actions and Ramsey's discussions regarding his own departure as 'concerns' of undue influence and governance; reasons to put the UofL's accreditation on probation.

"This will be resolved," the University's Acting President Dr. Neville Pinto told Board members. "I don't expect there'll be any period when our University isn't accredited by SACS."

Pinto also said that his departure to assume the presidency of the University of Cincinnati should have "no effect" on resolving SACS' concerns.

The task charged to the foundation's newly-hired interim Chief Operating Officer former Thornton' executive Keith Sherman? Set a responsible course that promotes transparency.

"We covered...an overview of by-laws, public meetings laws, standing committees and open records requests," a news release quoted Sherman as saying. "All of these are critical to maintaining stakeholder confidence."

Moore announced a settlement of a suit with the Kentucky Center for Investigative Reporting, regarding the foundation's financial and contractual documents. The Foundation is turning over the records requested, and will pay $15,000 - presumably, the Center's legal fees.

"UofL's Foundation is critical to the success of our students and faculty," Sherman told the Board in open session.

The search for a permanent Executive Director/COO is underway.

"First, you gotta look at cutting expenses," Lynn said. "There's a lot of things we can reach out and do."

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