THE MOST IMPORTANT OFFICE in the entire University of Michigan system isn’t even on University property. About a mile from the Ann Arbor campus, it’s at the corner of Huron Street and Main Street, where a towering, angular office building looms large over the city’s business district.

In a fifth floor suite of that building, a team of finance specialists in the University Investment Office are hard at work managing the school’s vast investment portfolio. The largest of these is the University’s multi-billion-dollar endowment — a portfolio of over 6,000 different investments in stocks, bonds, venture capital, real estate and energy, among others — and the school’s financial backbone.

At the entrance to the Investment Office is a glass door that bears the University seal, a reminder of nearly 200 years of history. And it’s the job of the investors on the other side of that door to lay the financial groundwork for another couple centuries of maize and blue.

Leading that team is Erik Lundberg, the University’s 49-year-old, Norwegian-born chief investment officer.

Since arriving in Ann Arbor in the fall of 1999, Lundberg has transformed a relatively modest portfolio into one of the leading endowments in all of higher education. Before the collapse of the financial markets last fall, Lundberg had more than tripled the value of the endowment — from $2.5 billion in 1999 to $7.6 billion as of June 30. For the 2007 fiscal year, the endowment recorded a return of over 25 percent, one of the highest in the country. And in annual rankings published by the National Association of College and University Business Officers, the University’s endowment climbed from 13th overall and 4th among public universities in 2002 to 8th and 2nd, respectively, in 2007.

The success in investing couldn’t have come at a better time. State appropriations, once a substantial and reliable source of funding for the University, have decreased more than $96 million in the past seven years when measured for inflation — meaning that the University must rely on its endowment more than ever before.

Lundberg is the one who must guide the University through the current financial crisis, guarding the endowment against depletion at a time when donors are tightening their belts and the stock market is wrought with uncertainty. It’s a difficult job and the University has not ridden through the recession unscathed. Since the beginning of the fiscal year on July 1, the endowment has lost an estimated 20 to 30 percent of its value. But with the economy as it is it’s to Lundberg’s credit that the University wasn’t hit harder and sooner. The endowments of other major universities can attest to that — in June 2007, when the University recorded a 6.4 percent on its investments, large endowment funds lost an average of 4.4 percent.

J. Ira Harris, a veteran investor and longtime member of an external investment committee that advises the chief investment officer and investment team, says Lundberg’s job is paramount to the success of the University of Michigan.

“There are a very important number of jobs at Michigan, including the president, including the head football coach and including the chief investment officer,” Harris said.

Yet unlike University President Mary Sue Coleman or Michigan football coach Rich Rodriguez, Lundberg keeps a low profile on campus. He tends to stick to his downtown office — that is, when he’s not on the road, meeting investing partners and fund managers from throughout the world.

Nor does he fit “master of the universe” financial guru image, either. Over two interviews in October and January at the Investment Office, Lundberg spoke with me about his job, how the endowment works and his thoughts on the future of the financial markets. In each interview, his modest, laid-back tone and impression (he prefers sport jackets with khakis or jeans over suits) belied the subject of our conversations: billions of dollars of investments, a financial crisis crippling the global economy and the future of the University.

His faint Norwegian accent affecting the occasional word or two, Lundberg described the composition of the endowment simply, patiently, for someone unfamiliar with long-short trading strategies or derivatives. For instance, in discussing the endowment’s various assets classes — the groupings of investments like stocks or real estate worth hundreds of millions of dollars each — he referred to them instead not as complex financial assets but as “buckets” with money in them.

That modesty, however, understates the growing importance of the endowment. Today, the University, quite frankly, could not exist without it.