Endowments » How an Endowment Works

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How an Endowment Works

Endowed funds are philanthropic investments with a minimum balance requirement meant to provide funds forever in accordance with guidelines set by the donor. SARA helps structure an agreement with the CWRU Office of Investments so that the rowing team receives the benefit of the endowment.

The current minimum balance required to start an endowment at CWRU is $25,000, which can be pledged and paid over 5 years. The target annual distribution is 5%. At the endowment's creation you can designate its use to specific causes like coaching, equipment, regatta support, etc. Thus, creating a "restricted fund" with the university that will support that cause in perpetuity.

With your endowment gift you are buying something akin to mutual fund shares in a large pool. The university's endowment pool is roughly $1.8 billion (35th largest in the country) and your fund is tracked and reported just as if it were part of a large mutual fund. You will receive annual financial statements from the university including fund balance and how much was distributed to the team in your name.

From 1987 to 2010 the university's endowment has returned 8.5% on average. With a targeted pay out from 4 to 6% this allows for a steady stream of distributions for current expenses and growth in principal. Below is an illustration:

The Office of Investments has three goals in managing the endowment funds:

• Outperform market benchmarks

• Protect the real value of assets over time

• Support reliable distributions to the university's operating budget

In addition to providing a permanent stream of income for the university, endowment funds are a meaningful way to establish a legacy or honor family members, friends or mentors. Donors can establish endowed funds through an outright gift or through a life income gift or bequest that converts to an endowed fund upon maturity. Endowment and planned giving is an effective way to manage your tax burden.

Next: Endowment Gift Benchmarks