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9 > Image 9 of Minutes of the University of Kentucky Board of Trustees, 2011-03-29

Part of Minutes of the University of Kentucky Board of Trustees

-9- Q. Data Center Infonnation Technology Equipment Hospital { FCR 3) Mr. Stuckert said that FCR 3 funds the facility approved at the board of trustees meeting on February 22. This FCR covers the hardware for servers, network storage, and security components for the immediate capacity needs of our hospital. Mr. Stuckert moved approval of FCR 3. Mr. Shoop seconded his motion, and it carried without dissent. (See FCR 3 at the end of the Minutes.) R. Investment Committee Report Mr. Roberts gave the Investment Committee Report in the absence of Mr. Gatton, chair ofthe Committee. The Investment Committee met on March 28 to review perfonnance results and conduct other business. The Endowment had a net market value of $882.5 million as of February 28, 2011. For the seven months ended February 28, the Endowment pool retumed 17.2 percent, which is in line with the policy benchmark return of 17.3 percent. The committee heard an update on the newly established Endowment Advisory Group. At its September 2010 meeting, the Investment Committee approved changes to the Universitys Endowment Investment Policy. Among other things, the committee established the Endowment Advisory Group, made up of senior administrators and faculty appointed by the President, to advise the Vice President for Financial Operations and Treasurer on matters related to the management of individual endowment funds. The Group reviewed spending on underwater endowments, which are endowments whose market value is below the contributed value. While the Endowment has experienced a strong recovery, UK still has some individual endowment funds that are under water. The Endowment Advisory Group recommended that, effective for Fiscal Year 2011-12, spending distributions be reduced by 25 percent for endowments under water more than 10 percent. This will impact 298 ofthe 1,971 endowment funds. Distributions from those 298 funds are expected to be reduced by $1.1 million to $3.4 million. The Endowment Advisory Group also reviewed minimum endowment levels and recommended new levels to the administration which are under consideration. The Investment Committee also reviewed results of the 2010 NACUBO-Commonfund Study of Endowments released in late January. NACUBO stands for National Association of College and University Business Officers. Of the 865 public and independent institutions that reported their endowment values as of June 30, 2010, UK ranked 84 (or in the top 10 percent). The average retum of participating institutions was 11.9 percent for the year ended June 30, 2010. UK eamed 13.1 percent during the same period due to a higher than average equity allocation. UK has gradually reduced its equity exposure over the last 18 months, increasing the allocation to absolute retum and other altemative strategies in an effort to reduce volatility of retums. The Committee reviewed a benchmarking summary of 2010 retum and asset allocation data for the Top 20 institutions. The Universitys target asset allocation is in line with the average allocation of those institutions.