An endowment is a permanent gift that is invested for the long term to provide sustainable financial support for the university. The gifted funds yield investment returns based on global market conditions and provide an annual payout, which is determined by the ASU Foundation investment committee, to support the donor’s designated use.
Endowments are fundamental to the financial stability of universities, public or private, large or small. A healthy endowment is an essential measure of a university’s financial stability and allows the university to go beyond its base budget allocations. Endowments provide the measure of excellence that propel a university from good to great by supporting programs worthy of national and international attention. For example, endowments allow the university to:
Arizona drastically curtailed support for higher education between 2008 and 2012 (latest available data), decreasing funding per full-time student by 49 percent, the deepest cuts of any state in the U.S. (Center on Budget and Policy Priorities). Yet during that same period, full-time student enrollment at ASU increased by 20 percent. This disparity between funding and growth meant that, in fiscal year 2012, the state provided 18 percent of the university’s total budget, compared to 35 percent in 2008. These ongoing and cumulative funding cuts make substantial, sustained income from endowment gifts to the ASU Foundation more crucial than ever.
Absolutely. Donors may establish or add to endowments that support a specific scholarship or program at the university. As the donor, you may designate an ASU beneficiary, typically a school, college or program. The ASU beneficiary will be responsible for spending the annual payout in a manner consistent with your original intent.
You have flexibility in how you establish your endowment: with an outright gift, a pledge or an advised bequest. But depending on the purpose of the endowment, ASU has established guidelines for minimum gift amounts that will ensure the annual investment payout is sufficient to support the intended programs. A general endowment can be established with a minimum gift of $25,000. Scholarships, fellowships, faculty professorships and chairs, and other program-specific endowments have higher minimum gift requirements.
Absolutely. You or others may continue to support your endowment through additional contributions.
A strong university endowment provides a permanent source of operating support for achieving ASU’s mission and goals. In 10 years, the university’s endowment has more than doubled, growing by 123 percent from $248 million to $553 million. This growth was made possible through the impact of investment
returns combined with new endowment gifts.
The investment committee of the ASU Foundation board of directors invests the endowment that supports ASU. The overarching goal is to invest the funds in a manner that balances the needs of the university for both current and future generations.
The ASU Foundation has earned the highest-possible rating awarded by Charity Navigator, the nation’s largest, most-utilized evaluator of charities — a premier “Four Star Charity” rating for the second consecutive year. Charity Navigator’s 4-Star rating of the foundation included an average score of 68.94 points of 70 possible, the highest of all 105 educational nonprofits ranked, and included a perfect score of 70 for transparency and accountability.
The ASU Foundation Board of Directors empowers an investment committee of eight board members, assisted by advisers from ASU, the ASU Alumni Association and the financial community. The committee invests each gift to the endowment as part of a pooled fund comprising a diversified, professionally managed portfolio. Combining the value of individual endowments in a single, strong fund for the purpose of investment maximizes returns, increases investment opportunities and minimizes administration fees.
Effective July 1, 2013, the ASU Foundation began using an outsourced chief investment officer model (OCIO) offered by Perella Weinberg Partners to manage the investment portfolio. This endowment and pension management structure has gained popularity among institutional investors due to its suitability for dealing with complexities in the global investment landscape. Among the expected advantages are:
Endowment returns for fiscal year 2013 (July 1, 2012–June 30, 2013) were 12.4 percent. However, an endowment is a long-term investment, thus it is relevant to consider longer-term performance as well. Over the last 10 years, the endowment pool yielded an average annual compound investment return of
An endowment is established through a formal gift agreement executed between the donor and the ASU Foundation. This agreement documents the donor’s spirit and intent in establishing the fund, the purpose of the endowment, administrative instructions, and specific criteria or other instructions to the ASU beneficiary. If the donor is funding the endowment with an estate gift, the donor may also sign a statement of testamentary provision.
After the minimum required funding levels have been achieved and all required paperwork has been completed, payout allocations will be provided in accordance with the foundation’s routine cycle. Payouts are calculated after the close of each calendar year and provided to the ASU beneficiary at the beginning of each fiscal year, July 1. For gifts that meet the payout thresholds arriving during the calendar year, payout begins the following July 1.
Currently, the foundation uses a constant-growth spending policy to provide greater predictability in budgeting while protecting intergenerational growth. This methodology increases the payout annually, consistent with the current-year inflation rate, subject to a cap and floor (4 percent and 3 percent, respectively) of the 12-quarter average market value. By ensuring that the endowment payout is within the cap and floor, the endowment will provide a stable and predictable payout for future spending. For new endowments established during a calendar year, the initial payout is approximately 3.5 percent of the gift value.
For public university foundations across the U.S., management fees on endowed funds continue to be the most common and significant funding sources (Council for Advancement and Support of Education). Currently, endowments to ASU are subject to an annual institutional advancement fee of 1.5 percent of the 12-quarter average market value to provide discretionary support for the university and the foundation.
The Foundation does not charge an intake fee on gifts given to the endowment, however, all gifts to ASU and its affiliates, endowment and otherwise, are subject to the ASU policy that allows 95% of a gift to be restricted to a particular purpose at ASU and the remaining 5% is unrestricted for use to advance the University. This means that 95% of an endowment gift will be placed in the endowment fund to grow and be used per the donors' restrictions.
For more information on the ASU Endowment, please contact:
Vice President, CFO and Treasurer
Vice President and Managing Director–Development