What is an Endowment?
Glossary
A charity’s endowment is a pool of assets set aside and invested. Assets (the principal) may include cash, securities, real estate and real property. Investment strategies balance income and growth.
In most cases, a portion of the annual investment income is spent by the charity, and the remainder of the income is added to the endowment principal. Clarkson spends each year income equal to 5.0% of the value of the endowment averaged over the past 12 fiscal quarters. All income over this 5.0% level is reinvested to increase the value of the principal, and increase income the following year. Thus, in any given year, if the value of the return on investment is 12%, 5.0% is spent on programs and 7.0% is added to the principal.
Portions of endowment may be permanent, (the principal cannot be spent), or "quasi" (the principal may be spent). Portions of endowment may be restricted to specific purposes. The term "endowed fund" is often used to describe a named portion of a larger endowment. For example, a donor may create "The Smith Endowed Fund for Scholarships,” a permanently restricted segment of the larger endowment used to generate support for student scholarships.
Gifts of any amount may be made at any time to existing endowed funds. A minimum gift or pledge is required to create a new endowed fund. A pledge may be fulfilled generally within five years.
When an endowed fund is created, guidelines are drafted to determine how the income may be used. Guidelines may be specific (e.g., scholarships to students from the North Country region of New York state), or broad (e.g., general operating support for a specific academic department).
Endowments are often planned as bequests. Guidelines can be drafted and retained on file until such time as the gift is received and the endowed fund created. These are often created as a legacy or memorial (e.g., "The Jones Family," or "John Jones Memorial Endowed Fund").
Clarkson Endowed Fund Minimum Levels
| Naming Opportunity |
Endowment |
Annual Expendable Income at 5.0% |
|
Faculty Chair |
$2,000,000 |
$100,000 |
|
Research Center |
2,000,000 |
100,000 |
|
Professorship |
1,000,000 |
50,000 |
|
Staff Position |
750,000 |
37,500 |
|
Visiting Professorship |
500,000 |
25,000 |
|
Graduate Fellowship |
100,000 |
5,000 |
|
Faculty Development Fund |
100,000 |
5,000 |
|
Presidential Scholarships |
100,000 |
5,000 |
|
Undergraduate Scholarships |
25,000 |
1,250 |
|
Program Funds |
25,000 |
1,250 |
This web page does not provide legal or financial advice, nor is it a comprehensive review of the topic. You should consult your legal and financial advisers and Clarkson University before making or planning your gift.