Seattle University's finances improved this past fiscal year after the 2008 peak of the economic downturn delivered a swift blow to the university's endowment fund.

Following a disappointing 6 percent return in 2010, the endowment fund made a return of 19.2 percent in fiscal year 2011. So far, 2012 is looking up as well.

"January started off quite nicely, so we hope that the second six months will give us something positive, but that remains to be seen. We're still in a nervous economy," said Thurston Roach, chair of the Seattle U Investment Committee.

A university endowment fund is essentially a pool of endowed gifts that are invested into various asset classes including equity and emerging markets. Ideally, the invested sum then increases over time and the returns come back to the university to be used in the operating budget. Endowment returns support approximately 5 percent of the university's operating budget.

"The higher returns, the more the endowment grows. The more the endowment grows, the more support provided to the university through endowment withdrawals," said James Adolphson, associate vice president for finance.

In fiscal year 2009, Seattle U's endowment lost 24.9 percent of its value following the August 2008 height of the economic crisis, according to the Seattle U Finance and Budget Office.

Although the economic downturn undoubtedly hurt Seattle U financially, the losses were below average compared to similarly sized universities with endowments in the $100 to $500 million value range. Compared to universities with large endowment funds, the consequences were minor.

According to the New York Times, Harvard University lost approximately 22 percent of its $3.69 billion endowment fund in the four months following the August peak of the 2008 global recession. Dependent on the endowment for approximately 35 percent of its operative budget, the loss was painful.

"For a number of years leading up to this past crisis, it was assumed that you could truly take a long-term approach to investing. The larger universities — Harvard, Yale, Princeton specifically — that have huge endowment funds, had become very heavily invested in illiquid asset classes," said Thurston Roach, chair of the investment committee.

Long-term investments in illiquid asset classes resulted in significant losses for many universities and investors hit by the economic drop. Deciding to pursue a more liquid investment structure, Seattle U replaced investment consultation service Wurts and Associates with Cambridge and Associates after the downturn. Cambridge and Associates still advises the investment committee today.

Cambridge and Associates restructured the university's investment portfolio in a way that would offer better future returns by focusing its investments in liquid assets that provide easier and quicker access to actual cash. Beginning in 2008, Seattle U began to actively move away from investments in less liquid funds like venture capital and real estate in favor of more traditional investments like stocks and bonds.

"[The economic crisis] cautioned everyone, investment committee included, to be a lot more conservative and have a view towards preservation of capital and acquiring greater liquidity," Roach said.

In June 2009, the end of the fiscal year, 32 percent of Seattle U's endowment fund was invested in liquid asset classes. Forty-five percent was invested in liquid assets as of October 2011.

Despite the "nervous economy," Seattle U has managed to uphold the values of social justice even in its investments. In fiscal year 2010, Seattle U moved $500,000 from investments in US Bank to a microlender called Global Partnerships.

"The purpose of [investment] is to support the university and the education of its students and we want to do that in a responsible way that would be faithful to the values and mission of the university," Roach said.

Kellie may be reached at kcox@su-spectator.com