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Endowment FAQs

Students at commencement

What is endowment?

The University of Redlands’ endowment is a perpetual fund created by gifts from donors. The fund principal remains intact and is invested, while yield is available to support programs such as student scholarships, faculty chairs, professorships, research or programs, building maintenance or library acquisitions. Donors also may designate endowment gifts that allow the university to use the available income where it is most needed.

How does endowment differ from annual giving? Funds received from annual giving are usually expended in the year in which they are received in support of the university’s various programs. Gifts to endowment are not expended. Instead, they are invested, and a portion of the yield is spent each year. Annual gifts to Redlands must be repeated on a yearly basis to provide continuing support for academic programs. Gifts to endowment provide support in perpetuity.

What makes endowment grow?

Major fundraising initiatives, such as the Centennial Campaign, have allowed the university to expand its endowment assets and available income at a rate faster than increases in expenses for such things as instruction, departmental research, and student aid. Two growth strategies are employed by the university: new endowed giving provides new growth in current dollars, while the wise investment of the portfolio provides a total return greater than the rate of inflation.

How large is Redlands’ endowment?

The University of Redlands’ endowment has an estimated market value of more than $100 million. Its endowment is substantial; however, the university remains extremely tuition-dependent. Continued academic excellence requires growth in endowment.

What happens to endowment gifts when they are received?

Gifts to endowments are generally placed in an investment pool consisting of stocks, bonds, real estate, and venture capital. Each endowment gift purchases shares in the investment pool, with every share having an equal interest. The total market value of all shares equals the total market value of the pool.

What determines how much of the annual income from endowment investments can be spent?

Redlands, like most major universities, employs a spending rule, which limits the amount of investment earnings that may be used in a given year. By protecting the purchasing power of the university’s assets, this budgeting policy serves the interests of both the donor and the institution. The spending rule provides the university with stabilized yield distribution for support of its current operations, and allows the university to plan for expenditures without substantial concern about the vagaries of the economy.

What does Redlands do to protect its endowment from inflation?

Each year, as part of its operating budget, the university defines the value of the spending rule formula for the next fiscal year by considering historic market values and long-range expectations for total return on investments. This figure typically falls between 4 to 6 percent of the average market value of the previous 12 calendar quarters.

By stabilizing the distribution of yield through its spending rule, Redlands is able to invest for current income, as well as, for the long-term growth of assets. This investment strategy, a common practice in higher education, provides a margin for the university and a hedge against inflation.

Who decides how Redlands’ endowment is invested?

The Redlands’ endowment portfolio is designed to produce the maximum total return on that portfolio. Day-to-day decisions are entrusted to investment management firms with expertise in handling institutional portfolios. Ultimate authority for all endowment investment decisions rests the Board of Trustees, which acts on recommendations from the Investment Committee and senior officers of the university.

Is there any special recognition of endowment gifts?

Endowed gifts are frequently established in the name of an individual or other entity specified by the donor. As an enduring form of philanthropy, an endowment gift carries that name forward, linking it to the faculty chair, professorship, or other program or function the endowment supports.

What is an endowed chair or professorship?

Redlands, as a private liberal arts and sciences university, has succeeded in large part because of the financial security provided by committed donors. Their well-invested gifts are a powerful counterweight to the vicissitudes of the economy and its effects on enrollment and financial support. Such gifts also offer donors a chance to leave their lasting mark on the university through the work of the endowed faculty who are the recipients of named chairs and professorships.

Chair and professorships mainly differ in amounts of funding. Chairs generally are funded at a higher level, providing more support for salary and related expenses. Backed by substantial endowments, both categories allow the university to attract and retain renowned faculty. Such an endowment supplements a chairholder or professor’s salary, making it competitive within a discipline and commensurate with the faculty member’s attainments.

Depending on the size of the endowment and its growth over time, annual income from an endowed position also may provide funds for certain of the chairholder’s essential academic activities, provide support to the most promising graduate students in the chairholder’s field, or help underwrite the cost of required office operations.

What is an endowed research or professional development fund?

A donor may wish to support continuous scholarly research or creative activity in specified areas. Endowed funds may be designated for a succession of assistant professors or faculty fellows in important academic endeavors.

How is an endowment fund created?

The simplest method of creating an endowment fund is through a single gift of cash or other assets totaling the amount of the endowment. A bequest, which establishes an endowed gift upon the death of the donor, is a prevalent arrangement. Other approaches include the creation of a life income trust through a gift of securities or real estate and the establishment of an endowment through a series of annual gifts that provide income and build endowment principal.


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