In challenging economic times, the University invested in its future and achieved historic milestones.
It’s been more than four years since the nation encountered one of the most extraordinary economic downturns in its history. At universities and colleges, those years marked significant losses in endowment value, followed by a prolonged slump in philanthropic giving, increased need for financial aid, and unrelenting pressure to limit costs. Not surprisingly, many institutions responded with drastic measures: major capital projects abandoned, hiring frozen, financial aid policies weakened.
At the University of Chicago, the past four years will be remembered, instead, for milestones like these: a historic expansion of the faculty that has attracted outstanding scholars from across the nation, and across disciplines; the opening of the Joe and Rika Mansueto Library, the Center in Beijing, the Reva and David Logan Center for the Arts, and, in December, the University’s largest capital project yet, UChicago Medicine’s Center for Care and Discovery; the creation of a whole new field of study, in the Institute for Molecular Engineering, and a new approach to traditional fields, in the Neubauer Family Collegium for Culture and Society; and substantial increases in financial aid for undergraduates and financial support for graduate students.
Why were University trustees willing to make such bold investments in a difficult economy?
They believed that the ambitious strategic plans developed by faculty and academic leaders would move the University forward in the long run. Leaders across the institution showed financial discipline, making tough decisions about cost cutting and investments. And that strategic approach was showing demonstrable results.
Supporting it all was an unusual integration of financial management across the entire institution, at many levels. This integration has allowed the University to be nimble and responsive, mitigating risk even as it pushed aggressively toward its goals. Our investment strategy, debt strategy, and liquidity strategy are closely aligned and integrated for the enterprise and not just for each unit.
As the financial crisis of 2008 unfolded, weekly calls were instituted among a working group of trustees and University officers. That close communication allowed the officers to tap more fully the financial expertise on the board, gave the board a clearer picture of how the University was moving forward, and ensured a unified approach. Out of those calls grew the Liquidity and Capital Resources Advisory Committee, now a standing subcommittee of the board’s Financial Planning Committee.
Within universities, cash management, debt financing, and investment are typically treated as independent endeavors. But during this period, the University of Chicago created a Financial Strategy Group that brings together on a biweekly basis the president, provost, executive vice president, vice president for administration and chief financial officer, vice president and chief investment officer, vice president and chief financial officer of UChicago Medicine, associate vice president for finance, associate provost and University budget director, and director of financial strategy.
A key piece of that partnership is the coordination among University financial managers and their counterparts at UChicago Medicine. Not only has that allowed more coherent planning across the institution, but it has also allowed the University to coordinate operations in areas such as human resources, finance, facilities, risk management, information technology, and legal counsel.
The Investment Office has adopted an approach it calls Total Enterprise Asset Management. While the analyses involved can be complex, the underlying goal is straightforward: to make sure that the University’s endowment is invested in the way that best supports the University’s strategic needs, in the short and long term. Rather than aiming at an abstract goal for its own sake, we work to make sure our investments have the flexibility and security to provide funds when they are needed by the University. Similarly, the forecasting done by the Investment Office helps inform budgetary planning so that opportunities are maximized and disruptions are minimized. Even as we have refocused our approach, our investment team outperformed our benchmarks.
Given continuing uncertainty in the nation’s and world’s economies, the University needs to continue to manage its finances with rigor and unity of purpose, maintaining both the discipline shown in recent years and the ambitions that set it apart from so many other institutions. The years to come will undoubtedly present challenges, but they will just as certainly offer opportunities to support our academic priorities at the very highest level.