He Who Controls UVA’s Strategic Investment Fund Controls Its Strategic Direction
This is the first part of a new three-part series exploring the influence of UVA President Ryan’s Strategic Investment Fund.
Back in December, University of Virginia President Jim Ryan unveiled a major philanthropic gift at the Board of Visitors meeting: Board member John L. Nau III had committed to donating $20 million to fund fellowships for College of Arts & Sciences graduate students. The sum, Ryan added, would be matched by $10 million from the University’s Strategic Investment Fund (SIF). The combined $30 million impact, he said, would support 30 to 35 grad students per year. Fellow board members gave Nau a round of applause.
The SIF, which is throwing off roughly $65 million a year that the University can spend any way it wants, is UVA’s secret fundraising weapon. It has helped UVA surpass its $5 billion “Honor the Future” campaign 18 months ahead of schedule. With matching dollars from SIF, Ryan reeled in mega-donations such as a $50 million gift creating the Karsh Institute of Democracy and a $100 million donation launching the Manning Biotech Institute. Few public universities have anything to compare.
Ironically, during the same meeting in which they lauded Nau for his generosity, some UVA board members made it clear they wanted to exercise tighter control over the SIF. They didn’t take issue with any of Ryan’s decisions on how to spend the income. Indeed, board member Doug Wetmore described the program as “very successful,” and he said the overwhelming majority of the administration’s proposals likely would meet board approval. But the board would be failing to exercise its financial duty, he said, if it neglected to review spending of such magnitude.
What went unsaid during the board meeting is that he who controls the SIF controls the strategic direction of the University of Virginia.
When UVA established the Strategic Investment Fund in 2016, revenue was allocated haphazardly based on who happened to apply for funding and the merits of their proposals. That changed in 2019 when Ryan argued that the resource should be used strategically: to advance priorities enunciated in the 2030 Strategic Plan. In concrete terms, SIF income has been allocated mainly to financial aid, endowed professorships, and sponsored research.
The Jefferson Council commends President Ryan for his overarching philosophy on how to maximize the impact of the SIF. The funds should be used to advance UVA’s strategic goals instead of being frittered away on small initiatives that don’t add up to much. We also support using SIF funds to match philanthropic donations and build endowments rather than launch new spending commitments. This fiscally prudent approach buttresses UVA’s coveted and money-saving AAA bond rating.
However, the Council also believes it is time to re-examine the strategic goals. The 2030 Strategic Plan was published in 2019. Half a decade has passed and much has changed — including the partisan composition of the Board of Visitors. UVA’s priorities should reflect those of Republican Governor Glenn Youngkin, who appointed thirteen of the board’s seventeen voting members, not those of his Democratic predecessor Ralph Northam.
The Council believes that the Board should use its power to review the Strategic Investment Fund to implement three vital goals consistent with Youngkin’s expressed priorities of lower tuition and fees, free speech, and intellectual diversity.
Cut costs and reduce tuition. Use SIF funds to identify opportunities to slash administrative overhead, bolster faculty teaching productivity, and reallocate resources from low-demand disciplines to high-demand disciplines. We support the goal articulated by Board member Bert Ellis to cut $200 million out of the university’s cost structure and use the savings to reduce tuition and help athletic programs pay student athletes as detailed by the recent NCAA settlement.
Restore intellectual diversity. Freedom of speech and inquiry are meaningless in an intellectual monoculture. Eliminating ideological litmus tests such as diversity statements is a start to restoring open discourse, but only a start. The university must make a concerted effort, backed by SIF funds, to identify and hire faculty members whose research and teaching exposes students to a wide diversity of ideas, not just the prevailing group think on social-justice issues.
Scrutinize research funding. A university’s level of sponsored R&D funding is a marker of its prestige in the academic world. UVA generates $714 million a year in research funding, and it aspires to join the “billion-dollar club.” But research funding entails complex and opaque financial accounting. Before approving use of SIF funds to subsidize research projects, the Board should have a full understanding of the implications for costs and undergraduate tuition.
What is the Strategic Investment Fund?
The SIF originated in the mid-2015 when the Board of Visitors authorized UVA to sweep up the cash from various financial reserves and other pots of money that were sitting in accounts yielding low interest rates. UVA hands the money, now totaling about $1.9 billion, to the University of Virginia Investment Management Company (UVIMCO) to invest at higher rates of return. UVA rakes off the investment income, 3% to 5% yearly, while taking care to preserve the underlying capital. UVIMCO maintains lines of credit to provide liquidity should the money be needed for its underlying business purposes.
The SIF is a brilliant financial innovation, and it gives UVA unparalleled flexibility. Unlike the vast majority of foundation grants and philanthropic gifts, which are tied to specific uses, income generated by the fund — budgeted to run about $65 million yearly through the 2028 fiscal year — can be spent any way that University leadership desires. Since 2016, the administration has dispensed roughly $1 billion to 81 distinct projects.
In the early years of SIF, faculty and staff submitted proposals that were evaluated on their individual merits. In 2016, for instance, UVA funded $2,950,000 to transform the university’s research-administration platform from a paper- to an electronic-based system; $250,000 to the UVA Library to “reimagine its support for research and scholarship”; and another $2.4 million to the School of Education to facilitate the transfer of students, especially “under-represented” students, from the local community college.
While this “bottom up” process had its merits, in 2019 President Ryan revised the SIF guidelines to tie grants to the 2030 Strategic Plan. Most funds since then have gone to three main priorities: financial aid, endowed professorships, and research. Typically, President Ryan has used SIF funds as a sweetener to close deals with big philanthropists.
Thus in the last three years, UVA has allocated the SIF funds, to pick representative examples, to the following:
McIntire School of Commerce expansion — $25 million
Biocomplexity Institute supplemental award — $16.7 million
Additional Bicentennial scholarships — $35 million
Additional Bicentennial Professorships — $30 million
Digital Technology Futures Initiative — $15 million (from two separate awards)
Faculty hiring — $27 million
At issue during the December board meeting was the degree of oversight the Board should provide. In the early years, the administration submitted all projects to the Board for review, and approvals were routine. The problem from Ryan’s perspective was that board meetings are spaced three months apart, and when negotiating a major donation, he sometimes needed answers quickly. He stopped submitting SIF expenditures for Board review, and instead has been consulting semi-annually with the Rector and Chair of the Finance Committee.
In December several board members said forcefully that they want to review and approve future SIF expenditures. A few board members expressed an if-it-ain’t-broke-don’t-fix-it philosophy. No formal proposal was submitted to board vote, and it is not known how Ryan will comply with the demands.
The Jefferson Council believes that the Board should resume oversight of the Strategic Investment Fund and, furthermore, that it should take the opportunity to assess the funding priorities set by Ryan. The Board’s responsibility is to set the university’s strategic direction; it should not cede that duty to the university president.
James A. Bacon is the founder of Bacon’s Rebellion and a contributing editor with The Jefferson Council.
