ANN ARBOR—The University of Michigan’s endowment grew from $5.7 billion to $7.1 billion in the 2007 fiscal year, benefiting from a 25.6 percent investment return and strong contributions from alumni and other donors, according to the annual Report on Investments presented by Regent Rebecca McGowan, chair of the Finance, Audit and Investment Committee, to the Regents at its meeting today (Oct. 25).

“Endowments are intended to provide a permanent stream of funds to support financial aid, key educational programs, and innovative research,” said Tim Slottow, executive vice president and chief financial officer. “The generosity of our donors, coupled with the success of our investment strategies, is key to our ability to continue to fulfill our mission in society for generations to come.”

At $7.1 billion, the University of Michigan’s endowment is now the ninth largest in the country and third largest among public universities. Approximately one-third of the funds derived from the University’s endowment support financial aid for undergraduates.

Erik Lundberg, chief investment officer, said that last year marked the fourth consecutive year of historically high returns. But he cautioned that the investments, and their payouts, must be carefully managed for the long term.

“Our overall goal is to ensure continuing support at predictable levels for the University’s activities in the face of inflation and the inevitable swings in the marketplace,” he said. “We’ve had a good run of success recently, but it followed a period of much lower returns. And looking ahead, periods of high returns are typically followed by periods of lower returns.”

The University of Michigan’s endowment is a collection of about 5,100 separate funds, each of which has been donated to provide permanent support for a specific university needs, such as scholarships, educational programs, or professorships. Institutions are legally bound to spend these funds only for the purpose designated. To ensure continuing support for future generations, the funds themselves are not spent, but invested so that part of the annual payout can provide a steady flow of dollars each year.