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P.O. Box 932

Lexington, Virginia 24450
304 Letcher Avenue

Lexington, Virginia 24450
P:  800-444-1839
P:  540-464-7287
F:  540-464-4545

Investments at VMI FAQs

Why are all endowments that in some way support VMI managed by one body?
To ensure the most cost efficient operations and effective investment management possible, all endowments that support VMI as well as the George C. Marshall Foundation are managed together--and have been for many years. First performed by the VMI Investment Committee, this work has been carried out by VMI Investment Holdings LLC since 2009.
Why did VMI Investment Holdings LLC come into being?
In 2009, after enduring a decade and a half in which two “bubbles” burst, the leaders of the VMI Alumni Agencies, the Institute, and the George C. Marshall Foundation decided that more dynamic management was needed for what can best be called the VMI Endowment.
Does VMI Investment Holdings LLC directly manage the endowment?
No. In 2009, it was decided to hire an independent investment firm to manage it. After an extensive search and a lengthy evaluation process, Cliffwater LLC, a nationally recognized firm that specializes in aiding institutional investors, was chosen for the task. Of course, such a management choice in no way relieves VMI Investment Holdings LLC of its fiduciary responsibilities.
What is the involvement of VMI Investment Holdings LLC in the management process?
Cliffwater LLC routinely reports to VMI Investment Holdings LLC, and there are quarterly meetings in which members of the VMI Investment Holdings LLC meet face-to-face with Cliffwater representatives.
What is the overall investment approach?
Before 2009, investments that supported VMI were weighted heavily toward equities and bonds. While this meant impressive gains when, say, the stock market was booming, it translated into serious losses when the bottom dropped out of the equities market. The current overall policy goal is to protect against major downturns. The new allocation entails more fixed income and fixed income associated investments as well as what are termed “defensive alternative investments.” Recently, it was decided to allocate some funds to private-equity investments.
What has the endowment’s recent performance been?

At the end of Fiscal Year 2009, the market value of the VMI Endowment was $234.7 million. At the end of the next four fiscal years, the value has been:

YearValue (In millions of $)
FY 2010$266.1
FY 2011$315.8
FY 2012$300.4
FY 2013$328.6

Thus, the value of the VMI Endowment from FY 2009 to FY 2013 has increased by $93.9 million or 40%. 

But the stock market has been booming lately. Recently, it closed above 14,000 points. Shouldn’t that mean a return to bigger investments in equities?
Admittedly, if the investment allocation were weighted more heavily toward equities, especially U.S. equities, the performance of the endowment might be stronger at this particular time. However, the enduring health of the VMI Endowment is essential to the lasting success of the Institute. So, the current strategy is seen as the best way to generate more support for VMI as well as add value to the VMI Endowment in the long term.
How much support does the endowment provide to the Institute?
Since 2004, the VMI Endowment has provided more than $100 million in support to the Institute. It has done so in part because the distribution rate has been kept relatively high at 4.8% (most institutional endowments’ rate is 4%). In those years, VMI’s need for increased private support overcame the need to grow the endowment—which also affected the growth rate in its market value.
How can the endowment grow faster and keep providing increased support to VMI?

First, by adhering to a sound, long-term investment strategy that protects against market volatility as much as possible. Second, more growth in the endowment would allow VMI Investment Holdings LLC to reduce the distribution rate and return more funds to the endowment’s corpus. 

Another way is by adding to the corpus through successful fundraising. In this regard, the trend in fundraising is positive. In Fiscal Year 2013, the VMI Family gave more than $100 million in gifts and commitments in support of the Institute, and many of these gifts and commitments are earmarked for new and existing endowments.