The university has been taking some risks to offset falling funding from the state, investing in more volatile stocks in the hopes of receiving higher returns.
The diversification of the investment policy has been going on for the past five and a half or six years, said David Creamer, vice president for administration. The more diverse a portfolio is, the more stable it will be overall. A decline in one area can be supplemented by an increase in another.
The Board of Trustees took this plan into its final stages at its last meeting, Creamer said. There still need to be some shifting in allocations, but the plans are set.
The university has been shifting funds from mostly fixed income vehicles, such as government-backed bonds, Creamer said. These types of investments are predictable in terms of returns. Some of the funds have been moved to alternate investments – stocks from small, large, American and international companies.
The university invests in managers, not companies, said Matthew Fajack, executive director of financial affairs. The managers choose what companies to invest in.
“We don’t put any criteria on them,” Fajack said.
These companies range from Gap to Google and from Anheuser-Busch to the Bank of America, Fajack said.
The university invests in about 14 managers with about 20 to 25 holdings of stock each, Creamer said. This way, Kent State’s financial future is not dependent on the success of a particular manager or stock.
This money goes straight to the operating budget, Creamer said. A positive return directly impacts the quality of education or the cost of tuition.
Before, almost all of the university’s investments were fixed income. In about a year, only 25 percent will be. The newer investments contain the possibility of failure, but also that of greater returns, Creamer said.
“We can control that a little bit,” Creamer said.
The university will try to minimize risk, but there will still be cycles, he said. For example, after Sept. 11, stockholders lost money no matter what. Kent State will try to preserve a portion of funds to draw back on for such situations.
In the future, the university may look into investing in real estate or natural resources, he said.
Contact administration reporter Rachel Abbey at [email protected]