June 26, 1998
KALAMAZOO -- In order to increase its return and lower its risk on investments, Western Michigan University has been authorized by the Board of Trustees to place a portion of its cash not needed for short-term operations into long-term investments.
The University has had a longstanding practice of placing its available cash in short- and intermediate-term investments. Now it can place up to 20 percent of its cash in long-term investments, which yield a greater return and offer diversification to reduce risk.
The Board of Trustees authorized investment in Barclay's Global Investors S&P 500 Index Fund at its meeting June 26 to implement this long-term investment strategy as part of the University's investment policy.
"There is a very low likelihood that the cash involved in a long-term strategy would be needed for short-term operations," said Robert M. Beam, vice president for business and finance. WMU receives cash from a variety of sources, including tuition, state appropriations and other entities.
Beam explained how WMU could generate a greater rate of return from long-term investments than from short-term investments. As of March 1998, the University's one-year short- and intermediate-term investments had generated a rate of return of 7.2 percent. In contrast, the WMU Foundation endowment portfolio, which has a long-term objective, had generated a return of 31.7 percent.
"Our first-year goal is to transfer $10 million out of short- and intermediate-term investments and provide these assets for long-term management," Beam said.
WMU will continue to use the services of a consultant, Fund Evaluation Group Inc., which will be actively involved in monitoring both the University's as well the foundation's investment programs. "The Budget and Finance Committee of the Board of Trustees works closely with the consultant and with WMU staff members to ensure the best possible productivity of the University's assets," Beam said.
In other action, the Board of Trustees approved a resolution giving the administration authority to continue to operate under the University's 1997-98 budget. This is a standard practice used when the level of state appropriations has not been determined by June 30, the end of the University fiscal year.
The board also approved a final budget for 1997-98 that shows total spending of $201.7 million. That's $13.3 million larger than the budget originally approved at the start of the fiscal year. Most of the difference occurs where funds are carried forward from the previous year and allocated for specific purposes but not yet spent.
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