Editor’s Note: Today’s story is the final part in the Daily’s “Anatomy of an Endowment” series. It discusses how the University of Michigan and other universities are getting hit hard by the recent financial crisis. By today, we hoped to have dissected, described and analyzed in simple terms a massive, intricate financial portfolio — one that is critical to the University’s success.

Like so many other investment portfolios, the years of spectacular returns for college and university endowments abruptly ended last fall as the scope of the global financial crisis grew and markets plunged worldwide.

Now, instead of enjoying 10-, 15- and even 20-percent returns, endowment managers across the country are announcing losses of equal magnitude.

Harvard University has had the largest endowment in all of higher education — worth $36.5 billion as of June 30 — for the last seven fiscal years, according to the National Association of College and University Business Officers, which reports such data online beginning with the 2002 fiscal year. In December, school officials announced that Harvard’s endowment had suffered losses of about 22 percent, or slightly more than $8 billion, and could lose 30 percent by June 30, 2009.

A fellow Ivy League school, Yale University, has ranked second each of the last seven fiscal years; its endowment was worth $22.9 billion as of June 30. In December, the Yale Daily News reported that the university’s endowment had decreased to $17 billion — a loss of 25 percent — and that several capital projects on campus would be delayed.

And the University of California system’s endowment, one of the highest among public university systems, was worth $6.2 billion as of June 30. By the end of December, the UC system's endowment had lost about 20 percent of its value, down to about $5 billion.

The University of Michigan has experienced similar difficulties. Here, the school’s endowment has temporarily lost about 17 percent of its June 30 value, down to $6.3 billion from $7.6 billion, according to a March investment report filing made by University Chief Investment Officer Erik Lundberg and Chief Financial Officer Timothy Slottow.

And that $6.3 billion figure uses values for the endowment’s illiquid assets from Sept. 30 — illiquid investments that are likely worth much less now. Lundberg estimated in a recent interview that the endowment has likely lost 20 to 25 percent of its value so far this fiscal year, which began on July 1, and could end the fiscal year with total losses in that same range.

But while other universities have been forced to make spending cuts — Princeton University recently announced it could trim as much as $82 million from the next fiscal year’s budget — the University of Michigan has largely shielded itself from the immediate impact of the financial crisis, and is poised to weather the ongoing financial storm better than most.

So far, the University’s capital projects are progressing on schedule, and no major budget cuts, layoffs or hiring freezes have been announced.

Looking back on the lucrative years preceding the financial crisis, smart investing decisions and foresight on the part of the University’s investment team appear to have gone a long way toward protecting the endowment and the money it pays out to University colleges, schools, departments and other operations from the worst financial crisis since the Great Depression.

AVOIDING THE SUBPRIME CONTAGION

The cause of the current economic meltdown can largely be attributed to the subprime mortgage crisis and the bursting of the housing bubble in 2007. During this time, years of high-risk lending practices came to bear as mortgage delinquencies and foreclosures soared and subprime mortgage-backed securities tumbled in value.

“It started as a credit crisis — it was small,” Lundberg said in a January interview at his downtown Ann Arbor office.