ASI Executive Director Richard Haller shared in his Executive Director’s Report at the Sept. 8 Senate meeting that ASI’s investment portfolio had a net loss of $43,035 and USU’s investment portfolio had a net loss of $65,415 in August.
While the value of the portfolios has decreased by over $100,000 combined, ASI has not cashed out their stocks and actually lost the money.
“We had dramatic losses back in 2008, when the great recession hit,” Haller said in a later interview. “Those were eventually recovered, so if history is any indication, then I suspect we will recover those.”
Haller said they usually see a 5-6 percent return on investment each year.
“Stocks can be volatile,” Haller said. “And I think there were concerns about the Chinese economy not growing as fast as it has been in the past … The stock market reacts to the slightest things and if there’s the least bit of uncertainty, then people start selling off their stock. So the prices go down.”
The dramatic decrease in the values of the portfolios was felt across the entire U.S. stock market in August, said Wade Martin, a professor and chair of the economics department at California State University, Long Beach. He explained that the market sometimes experiences large readjustment periods when the prices have exceeded their values for too long, which is often referred to as a bubble.
“There were some wide swings in August that people didn’t anticipate for the most part,” Martin said. “And also realizing now, the [Dow Jones Industrial Average] and the [Standard and Poors 500], these are at historic highs, so there is always an adjustment process when they hit territory they’ve never been at.”
ASI has invested surplus funds into diversified portfolios since 2004. The invested money comes from the accumulation of savings from previous years that are not needed in current operations, Haller said.
Haller said that both of the portfolios are managed separately and in different accounts, but that they each have the same investment goals and parameters.
The portfolios are diversified, meaning there is no particular industry that they are concentrated on. Haller said a few of the companies ASI and the USU are invested in are Microsoft, American Express, Apple, Google and Mastercard. Citi National Bank manages the investments and trades on behalf of ASI and USU.
While it is common that university student governments invest their surplus money, Haller said it is not common that they invest in the stock market, which is considered riskier. Student governments usually invest in bonds and fixed-income investments, according to Haller.
The original investment was $700,000 into the ASI portfolio and $1 million in the USU portfolio in 2004, Haller said. He noted that ASI’s portfolio is now at over $1 million and the USU portfolio is at $1.5 million.
“People kind of refer to them as their rainy day funds,” Haller said. “Rather than dumping all of that money into a bank account or savings account that generates like no interest whatsoever, we try to have that money work for us and to generate additional money. Not just for income purposes, but mainly to grow the reserves, so that if there is an emergency, then we’ve got money there to take care of it.”
According to the ASI Investment Policy, the concentration of assets into any one company is not to exceed 5 percent of the total value of the portfolio. Martin said that it’s smart to diversify portfolios, as to not put too much money into any one company that could possibly be lost.
“[The stock market] is much more stable,” Martin said. “The market went through its adjustment and I think internationally, the Tokyo stock market has trended up, so you have more signals internationally that things are more stable, so the adjustment has already taken place.”