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Abilene Christian University Endowment Fund

Name: ACU’s Endowment

Assets Under Management: $614.7 Million (Source: Abilene Christian University on 5/31/2014)

Annual Report: Consolidated Financial Statements and Report of Independent Auditors Abilene Christian University May 31, 2014 and 2013

Portfolio Insights: “The accompanying consolidated financial statements include the financial position, activities, and cash flows of Abilene Christian University (the University or ACU), a not for profit institution of hig her education in Abilene, Texas; its subsidiaries, ACIMCO and ACU Management LLC; and additionally the Grace L. Woodward Memorial Endowment Trust. All significant interrelated accounts and transactions have been eliminated in the accompanying consolidated financial statements.

The University’s endowment is subject to the version of the Uniform Prudent Management of Institutional Funds Act (UPMIFA) enacted by the state of Texas, which is described in Note I. Under Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 958 Not-for-Profit Entities, a not-for-profit organization that is subject to an enacted version of UPMIFA shall classify a portion of a donor-restricted endowment fund of perpetual duration as permanently restricted net assets.” (Source)

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Top Abilene Christian University Endowment Fund Headlines:

1) For private universities such as ACU, the strength of the endowment fund is synonymous with the financial health of the institution. Even in the recent troubled economy, ACU’s endowment, under the leadership of chief investment officer Jack Rich, has grown, placing the university in the top quartile of its peer group.

Over the past 10 years, ACU’s endowment has grown from $145 million to more than $290 million – doubling in a difficult investment environment. Among all university endowments with assets over $200 million, ACU had the highest return – tied only with Yale University, the longtime leader in endowment returns.

“The secret to our positive investment process and performance is the way our board engages with our endowment staff,” says Rich. “Our consistent communication about priority endowment issues has allowed ACU to develop a progressive portfolio that has weathered the past few years with a minimal amount of disruption.” (Source)

2) The mission of Abilene Christian University is to educate students for Christian service and leadership throughout the world. This mission is achieved through: Exemplary teaching, offered by a faculty of Christian scholars, that inspires a commitment to learning; Significant research, grounded in the university’s disciplines of study, that informs issues of importance to the academy, church, and society; Meaningful service to society, the academic disciplines, the university, and the church, expressed in various ways, by all segments of the Abilene Christian University community. (Source)

3)  Abilene Christian’s $312 million endowment had a five-year annualized return of 9 percent. Spalding’s five-year return was 8 percent. Yale’s annualized return was just 3.1 percent, according to its 2012 report, though that was still better than the average endowment’s five-year return of just 1.1 percent. A spokesman for Yale noted that its endowment had a strong 12.5 percent return for the most recent fiscal year, which ended on June 30. Those numbers aren’t yet included in the three- and five-year averages. The spokesman said the university wouldn’t comment beyond the report.

Abilene Christian and Spalding aren’t the only small and midsize endowments that are outperforming their billion-dollar-plus peers. The data released this week shows that small (less than $100 million) and midsize ($100 million to $1 billion) endowments — which typically have smaller allocations to alternative investments — have surged ahead of the largest endowments over the most recent three- and five-year periods.

Endowments with assets under $25 million reported the highest average three-year return, at 11 percent, while those with assets between $25 million and $50 million reported the highest average five-year return, at 5.5 percent, according to the business officers association. (Source)

4) Abilene Christian University’s roughly $350 million endowment is managed by a two-person investment staff operating within the Abilene Christian Investment Management Company (ACIMCO). That the Abilene, Tex.-based private university created a separate investment corporation to manage its funds is striking; such a model is more commonly associated with large endowments like Harvard University’s $32 billion purse. CIO Jack Rich spoke at the National Association of College and University Business Officers (NACUBO) Endowment and Debt Management Forum in New York City on Feb. 7 about the benefits Abilene’s endowment’s governance structure offers and how the fund transitioned from a consultant-driven model.

ACIMCO was formed in 2009 after Abilene Christian University’s endowment committee was hit by board turnover. “Our board changed. We went from 60 members to 30, and in doing that, we lost every member of our committee, except for one person,” Rich said. “We lost the expertise and continuity and experience and engagement we had.” (Source)

5)  Abilene Christian University is looking at global macro hedge funds as it increases the diversity of the $245 million endowment’s alternatives allocation. There is no timeline for the addition and ACU has not yet determined any mandate sizes, said Jack Rich, president and cio of Abilene Christian Investment Management Company (ACIMCO). “We keep our eyes open,” he noted.

ACIMCO was formed last November, although most management companies are formed by large endowments. (Source)

About Richard C. Wilson