No t e s t o Co n s o l i d a t e d F i n a n c i a l S t a t eme n t s J u n e 3 0 , 2 0 2 3 a n d 2 0 2 2 Fair Value on a Recurring Basis Using Significant Unobservable Inputs (Level 3) The following is a reconciliation of Level 3 investments for which significant unobservable inputs were used to determine fair value (in thousands): 2023 2022 Beginning balance $ 234 $ 293 Net unrealized loss (9) (59) Ending balance $ 225 $ 234 All net unrealized gains or losses in the above table are reflected in the Consolidated Statements of Activities. Net unrealized gains or losses are determined based on changes in fair value of the instrument related to future expected cash flow associated with investments. The fair value of certain alternative investments represents the ownership interest in the net asset value (NAV) of the respective funds. The fair values of the investments held by funds that do not have readily determinable fair values are determined by each fund’s investment manager and are based on appraisals or other estimates that require varying degrees of judgment. If no public market exists for the investments, the fair value is determined by the investment manager taking into consideration, among other things, the cost of the investment, prices of recent significant placements of similar investments of the same issuer, and subsequent developments concerning the companies to which the investments relate. The university has performed due diligence regarding these investments and believes that the NAV of its alternative investments is a reasonable estimate of fair value as of June 30, 2023 and 2022. The following table presents additional information pertaining to alternative investments as of June 30, 2023 (in thousands), the fair values of which have been estimated using the NAV of the investment funds: Designated and Restricted Investments Other Investments Total Fair Value Unfunded Commitments Redemption Frequency (Subject to Restrictions Noted) Redemption Notice in Days Commingled Funds: Hedge funds1 $ 15,404 $ 14,156 $ 29,560 $ - M–Q2 14–45 3,276 4,339 7,615 - Q (Expiring Locks)3 45 4,044 3,538 7,582 - A (Rolling Locks)4 90–120 5,313 5,737 11,050 - V (Rolling Locks)5 120 7,003 - 7,003 - Q (Gate Restrictions)6 60–75 Subtotal 35,040 27,770 62,810 - Private capital: Private equity 7,387 - 7,387 11,234 Illiquid⁷ N/A Private real estate 1,778 - 1,778 1,959 Illiquid⁷ N/A Subtotal 9,165 - 9,165 13,193 $ 44,205 $ 27,770 $ 71,975 $ 13,193 ¹ Includes investments that may pursue alternative strategies to diversify risks, reduce volatility, and enhance returns. 2 Investments totaling $7.8 million within this category contain restrictions with respect to partial redemptions, which require that the minimum balance for each investment remain at $1.0 million. Full redemptions are permitted. 3 These investments are subject to lock-up provisions with up to one year remaining as of June 30, 2023. Redemptions during the lock period are subject to a 3.0 percent early withdrawal fee. M: Monthly Q: Quarterly A: Annually V: Varies 30
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