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Endowment Activation - Managing Gifts over Minimum Endowment Level

  • 1.  Endowment Activation - Managing Gifts over Minimum Endowment Level

    Posted 07-21-2022 11:07 AM
    Hi All - Curious to hear how endowment fund activation works in other shops for new endowments where gifts exceed the endowment minimum. For example, let's say your University's minimum for a new endowed scholarship is $100,000. A generous donor commits $500,000, to be paid over five years, in equal installments.

    • Once the first payment of $100,000 comes in, does your organization reinvest for the required period and then activate the new fund for spending? What about subsequent payments--would you reinvest each new payment for your required reinvestment period and then add it to the principal, or just add the payments to the principal?
    • [OR] Would you not activate until the full $500,000 has been received and reinvest the $500,000 endowment as a whole, in its entirety?  
    Thanks!

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    Marita Spooner
    Associate Director, Fund Establishment
    Boston University
    spoonerm@bu.edu
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  • 2.  RE: Endowment Activation - Managing Gifts over Minimum Endowment Level

    Posted 07-22-2022 06:43 PM
    Here's how we do it:

    Our default practice when the donor commits an amount that is beyond the threshold for the fund, is such that we do not turn on spending until the investment has reached the pledged amount and waits for the required period (one year). So, if it's a five year pledge, the fund will wait an additional year after the final payment is invested before spending is allowed. All subsequent gifts (beyond the pledged amount) are invested and are NOT subject to the required waiting period.

    That said, the donor can request that the spending begin after the minimum threshold amount is achieved. That deviation is captured in the gift and pledge agreements. In that case, the fund will wait for a year after the minimum threshold amount has been achieved, then spending may begin. All subsequent gifts (beyond the minimum threshold amount) are invested and are NOT subject to the required waiting period

    Of course, we have other spending rules in effect to protect the corpus in times of lousy markets.  The above explanation assumes the fund is not losing value due to market loses.

    Hope this is helpful!

    Best,

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    Nancy Randazzo
    Director of Gift and Fund Administration
    University of Montana Foundation
    nancy.randazzo@supportum.org
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