The Long View: UTAM’s 2024 Annual Report

UTAM is pleased to announce the release of our 2024 Annual Report, which provides a comprehensive overview of the performance of the Endowment and short-term working capital portfolios managed on behalf of the University of Toronto. The report also highlights our ongoing progress toward achieving key climate goals – including carbon footprint reduction, fossil fuel divestment, sustainable and low-carbon investments, and company engagements.

The report’s theme and title, The Long View, is a reflection of our continued and disciplined focus on a long-term investment horizon, looking past short-term market volatility. As UTAM President and Chief Investment Officer Chuck O’Reilly explains in his message to stakeholders, “The inevitable fluctuations in markets from week to week, and even year to year, typically don’t have a significant influence on how we construct the university’s diversified, multi-manager portfolios.”

In a year of turmoil and polarized opinions, writes Richard Nunn, Chair of UTAM’s Board of Directors, it’s important to reaffirm UTAM’s foundational values, particularly integrity. “For UTAM, as for the university we serve, integrity isn’t just an abstract ideal we pledge to uphold. It’s a concrete standard by which we judge our decisions and actions.” By staying grounded in these values – which underpin our purpose and provide direction to the achievement of our mission – UTAM is able to “step back from current distractions and take the long view,” he adds.

For U of T President. Meric Gertler, this year marks the end of his term; his steady leadership and principled guidance have left an enduring mark on UTAM’s direction. As Richard writes, “Meric’s legacy, especially as a champion of responsible investing and all aspects of sustainability, will continue to be a cornerstone of our success for many years to come.” Chuck also points out that the integration of ESG considerations into UTAM’s investment process is a reflection of Meric’s longstanding – and long-term – commitment to sustainability for the university as a whole.

Continued strong results over the long term

The Endowment portfolio – which includes the university’s long-term endowment assets (comprising more than 7,200 individual endowment funds funded through gifts from alumni and other donors) with other funds invested for the long term – delivered a return of 14.9% year over year (net of fees and expenses). Although the Endowment underperformed the benchmark Reference Portfolio return of 16.8% for the same period, it has generated substantial excess returns over the long term.
Over the 10 years ending December 31, 2024, the Endowment portfolio generated an annualized net return of 8.1%, exceeding U of T’s long-term target return of 6.6%, which is based on a long-term return objective of 4% per annum plus inflation. Our active management approach outperformed the passive Reference Portfolio benchmark for the same period by 0.9 percentage points annually (rounded), net of all fees and expenses.

The Expendable Funds Investment Pool (EFIP), which comprises short-term working capital assets of the University, returned 6.4% (net of all fees and expenses) in 2024, outperforming its benchmark target of 6.0%. Over the past 10 years, the EFIP portfolio generated returns of 2.3% per annum, outperforming its target return of 1.9% by 0.4 percentage points annually, net of all fees and expenses.

These results reflect UTAM’s success in achieving our strategic objective – to meet or exceed the university’s long-term risk and return goals for the portfolios we manage – writes Chuck O’Reilly. “And as we continuously fine-tune the complex portfolios that we manage, combining analytical insights with innovative thinking, we never lose sight of the ultimate goal: helping Canada’s largest university sustain its pursuit of world-leading excellence in education and research.”

Sustainability and performance are complementary

UTAM achieved one of its core climate commitments in 2024 – ahead of schedule. In 2021, we committed to allocating at least 10% of the Endowment to sustainable and low-carbon investments by 2025. By year-end 2024, that figure had reached 11.7%. “Reaching this target demonstrates how ESG priorities can complement prudent, disciplined investment strategy,” says Chuck O’Reilly. “I’m proud of the UTAM team for their hard work and diligence on this commitment.”

We continue to make progress towards fulfilling other primary climate commitments. We have further reduced the carbon footprint of the Endowment Sub-Portfolio (which consists of equity, equity-like and corporate bond securities) to 18.4 tCO₂e/$M (based on total emissions of 62,558.1 tCO₂e) from 32.4 tCO₂e/$M (based on total emissions of 96,760.1 tCO₂e) at the end of 2023.

On our commitment to fossil fuel divestment by 2030, our positive momentum continues. In 2022, we divested from all direct exposure to fossil fuel companies. Having divested of all direct holdings in fossil fuel investments in 2022, we have reduced indirect exposure – a more challenging task – from 2.0% of the Endowment’s net asset value at December 31, 2021 to 0.9% at December 31, 2024.

As part of our alignment with the university’s divestment initiative, we completed the transition of the Reference Portfolio’s asset class benchmarks to indexes that exclude fossil fuels, effective October 1, 2024.

These are significant steps towards aligning the Endowment portfolio with global climate goals and the university’s commitment to sustainability.

Insights from university leadership

This year’s Annual Report includes insights from two senior university leaders on UTAM’s role in supporting U of T. In a Q&A, David Palmer, Vice-President, Advancement, discusses how UTAM’s management of the Endowment contributes to its long-term stability and the university’s continued strength. As he explains, “Under UTAM’s careful stewardship, the Endowment has become increasingly important to ensuring that our university not only functions effectively but continues to thrive.”

President Gertler also shares his perspective on the university’s progress during his tenure – particularly in response to the climate crisis and the pursuit of sustainability. “The principles of responsible investing implemented over the past decade are now integral to how UTAM manages U of T’s assets,” he writes, “just as the goals of sustainability inform all dimensions of how our university sets priorities, makes decisions and plans for the future.”

UTAM’s investment focus on the long view, Meric suggests, correlates with the similar outlook the university must have to its own future. “This prudent approach, not surprisingly, mirrors the strategic trajectory of the university it supports,” he writes. “As an institution devoted to pursuing academic excellence, U of T must meet the needs of not only current students or the next cohort, but of the generations who will follow them.”

For more details, read and download the 2024 Annual Report, UTAM’s 2024 Financial Statements, Carbon Footprint Report and TCFD Report.