UW Foundation

Investments

Fiscal year 2023 began with positive-yet-cautious expectations. Our mission as an investment team has been and continues to be centered on providing the University of Wyoming support and financial backing. We are optimistic that we can deliver on that mission. However, the current environment for financial optimism is obviously challenged. The foundation pool return of 4% in 2023 did not meet our cost of capital.  

Interest rates have been inverted for over a year now. This inversion is far greater and longer than any other period in U.S. history. Compounding these financial conditions is the fact that our collective national debt burden, which is driven by deficit spending, will likely grow by more than $2 trillion this year, which is alarming. Interest rate inversions are normally a precursor to recession. So the case for financial optimism must also consider the compounding effect a recession might have on deficit spending and the associated debt burden.  

However, as the saying goes—every challenge is an opportunity in disguise. Complacency abounds when companies are comfortable, and complacency most often leads to lower rates of return. Imagine a slow-motion game of musical chairs—once change sets in, the music starts to slow and chairs begin to fill with those unwilling to wait until the music completely stops. Risk, which was happy to bide its time during the suppressed interest rate environment, patiently waits to make its appearance felt for those caught seeking comfort yet unable to find a seat. Fortunately, we have some chairs to offer those in need of a seat and are reasonably optimistic on earning ample risk-adjusted returns for doing so. In 2023, small, medium, and even regional banks came under intense pressure. Deposit outflows and increased focus on capital ratios led to a reduction in the extension of bank credit. This credit contraction has opened up new avenues in real estate lending, private debt, and even low-duration credit—places where we can be well compensated for the risk assumed in the allocation of new investment capital.  

We are emphasizing our ongoing efforts to reduce portfolio fees and complexity. Tools we use to address these problems include using direct investments in companies with investment strategies we can thoroughly understand and underwrite. As time goes on, we hope to further concentrate our efforts here and continue to believe that low-hanging fruit remains within our grasp. Internal success is avoiding large drawdowns following growth—keeping what we earned—and generating returns over our cost of capital. External success continues to be defined by the robust support of our students, faculty, and academic programs at the University of Wyoming, something that genuinely excites us.   

INVESTMENT ALLOCATION

The UW Foundation investment team continually evaluates asset allocation with special attention to the investment objectives and cash-flow needs of the endowment and the university. The liquidity profile of the pool remains strong in meeting the needs of UW for multiple years, even during turbulent markets. The UW Foundation investment team updates the allocation targets every year to help address an ever-changing financial landscape as the result of conversations between our Board of Directors and our consultant, Meketa.

To learn more about how the UW Foundation proactively and effectively manages investments, see the UW Foundation’s investment policy.