KU Endowment trimming monetary distributions as economic crisis worsens

Investment program shrinks by $290 million

Facing a deepening global financial crisis, the Kansas University Endowment Association is scaling back its monetary distributions to KU.

In a message to fund account representatives, Dale Seuferling, KU Endowment Association president, said that returns from the association’s long-term investment program had declined by 26.6 percent from July 1 to Oct. 31, or by about $290 million.

“This loss, while significant, is in line with the performance of the financial markets,” Seuferling wrote.

In response to the losses, he wrote that the association would reduce distributions from the association’s endowed and similar funds by 10 percent — or about $4.8 million — for the 12-month period beginning Feb. 1, 2009.

That reduction will mean less money available for many of KU’s permanent endowed funds, including those for student scholarships, faculty endowed professorships and many other permanent funds established by donors.

In anticipation of the news, KU distributed information to its present recipients of renewable scholarships indicating that fulfilling those commitments was a top priority, said Marlesa Roney, vice provost for student success.

“As long as that student meets the regular requirements, the funding will be there,” Roney said.

However, for incoming students, the number of available scholarships may shrink, she said. She said that one-time donations to the university could be solicited to help fill the funding gap.

Jack Martin, a university spokesman, said that with less money available, KU would direct deans and others who control endowed funds to meet existing commitments if possible. Then, Martin said, the university would seek to maintain its quality of education by focusing on its teaching and research missions.

He said that campus leaders will have leeway to adjust the budgets to best meet their needs.

Seuferling said that failing to make the adjustments to the endowment now would lead to overspending, eroding the endowment’s future value and spending power. And predicting the market should be done conservatively, he said.

“You can’t presume that it’s going to turn around and improve at the same rate that it went down,” Seuferling said.

In previous years, modest declines in the market have still resulted in yearly increases to KU endowed funds, Seuferling said, but this year’s steep decline has resulted in an exceptional circumstance.

“We don’t have the flexibility to mitigate the magnitude of this downturn,” he said.

The university has about 2,700 different permanent endowed funds, each for a different expressed purpose. For example, one such fund pays for the university’s Summerfield scholarships given for academic performance.

Of those funds, about 750 have a market value below the original gift amount, Seuferling said.

Those mostly represent newer gifts to the university, he said, which were most susceptible to the recent downturns.