E N D O W M E N T S
The following provides background information on college and university endowments.

What is an endowment?
An endowment is a fund that holds its principal in perpetuity and only distributes its income. Endowment investments have dual goals: growth of principal (capital appreciation) and generation of income. All or part of the income provides for continuing support of the endowed organization (e.g., educational institution, foundation, religious organization).

What is the scope of university endowment value?
Currently, 765 colleges and universities have combined endowment assets of more than $340 billion. According to the National Association of College and University Business Officers, some of the universities with the highest estimated holdings include Harvard ($29 billion), Yale ($18 billion), Stanford ($14 billion), University of Texas ($13 billion) and University of California ($6 billion). In fact, 62 schools have endowment assets of $1 billion or more. Over 347 schools hold endowments of over $100 million each and hundreds more schools have endowments in the tens of millions of dollars each.

Who controls a university’s endowment?
Official responsibility for the endowment lies with the fiduciaries—in most cases, the university’s board of trustees is legally responsible for the management, investment and distributions of funds. The concept of fiduciary responsibility has traditionally guided those who make the decisions related to endowment investments. For almost two centuries, the “prudent man” guideline for fiduciary responsibility in investments has meant maximizing financial return while minimizing financial risk. This generally accepted understanding of fiduciary responsibility has avoided dealing with externalities like environmental and social issues.

How do universities make endowment investment decisions?
At most schools, endowment investments are kept confidential and only made available to trustees and senior administrators. Usually the board of trustees’ investment committee evaluates investment options and sets policies for endowment management. Senior administrators, including the vice president for finance, treasurer and investment officer, provide day-to-day oversight of endowment investments. However, the actual investment decisions are usually outsourced to professional investment management firms and/or mutual funds.

Why is university endowment income important?
Largely funded by alumni contributions, endowment income helps pay for part of the operating budgets of colleges and universities. Endowments have soared in value in recent years, sometimes surpassing tuition as a source of income. Endowment income can pay for a significant portion of the cost of student education, thus minimizing tuition increases, while enhancing resources.