Impact of Losses in Investment Fund Will Be Slight, Schools Say

The investment returns of several Southern California colleges and universities, including USC and Pepperdine, will be only minimally affected by a trader’s losses due to unauthorized trading in a college investment pool, area schools said Wednesday.

The Common Fund, a nonprofit organization that pools $20 billion in endowment funds from 1,400 colleges, discovered earlier this month that a senior trader at First Capital Strategists Inc. of York, Pa., lost $128 million in unauthorized trades over the last three years. The Westport, Conn.-based fund bundles funds from institutions, then divides them among different types of investments so that colleges can have access to more investment pools.

USC spokesman Eric Mankin said the return on the portion of the school’s $625-million endowment invested in the Common Fund will be reduced by 0.19 percentage point. Even still, USC expects that this year’s return on its endowment pool will be greater than 10%, he said.

Pepperdine University spokesman Jeff Pippin said that the university’s returns will be 1 percentage point lower than expected because of the unauthorized trading. Pepperdine has a “significant amount” of its $150-million endowment entrusted with the fund.

Although University of San Diego has two-thirds of its $40-million endowment fund entrusted to the Common Fund, Fred Brooks, vice president of finance and administration, says that USD will still see a positive return on its investments this year.