Endowment Payout for 2009-10

PDAD&C#66, 2009-10


To: Principals, Deans, Academic Directors and Chairs
Divisional Business Officers via AMS listserv
Division Financial Officers via DFO listserv
From:        Cheryl Misak, Vice-President and Provost
Cathy Riggall, Vice-President, Business Affairs
Date: March 5, 2010
Re: Endowment Payout for 2009-10

The endowment payout rate for 2010 will be $7.26 per unit, representing 5% of the opening market value of endowments. This distribution will provide about $62.5 million to beneficiaries, an amount that is very similar to the previous distribution of about $62 million at April 30, 2008, and should provide a much-needed infusion of cash to endowment beneficiaries after the suspension of payout in 2009. The rate is very close to the actual base rate [1] payout per unit for 2008. While it does not provide for inflation for the intervening period it also does not contain any appreciable discount from that base rate.

This payout is the largest that can be contemplated for 2010 under current policy. It is also the largest considered reasonable and prudent given the large number of individual endowments that are expected to remain in some trouble in the coming years, and given the large inflation protection shortfall that needs to be rebuilt. Normally we would expect that cumulative inflation protection on hand is at least equal to the amount required to fully protect purchasing power. However, all inflation protection was eliminated during 2008-09 and we expected that it will take several years to rebuild. Therefore, for 2010, we are making a 5% payout while recognizing that, depending upon investment returns, there could be little or no progress this year towards restoring some accounts or rebuilding inflation protection. We believe that the resources and donor considerations make it imperative that a spending allocation be made in 2010, and that it be at the upper end of the corridor. The positive return of 10.26% for the nine month period from May 1, 2009 to January 31, 2010 makes this a reasonable basis on which to proceed for 2010.

It is important to note that this is a one-year endowment spending allocation and does not predict what the payout per unit will be in future years. Future spending rates will be affected by any changes arising from the review of the University's endowment investment policies which has begun and around which there will be broad consultation.

More information on endowments is available in the endowment annual financial report at http://www.finance.utoronto.ca/Assets/reports/endow/2009.pdf.  

If you have any questions about the administration of the payout for this year, please contact Helen Choy, Manager Accounting Services, at 416-978-2981. The annual payout for 2010 will be distributed by April 16, 2010.

[1] The 2008 payout of $7.65 per unit included an additional one time only increase of $0.37 per unit to maintain the position of the payout within the 3% to 5% spending policy corridor. The base rate for 2008, excluding that amount, was $7.28 per unit.