What is the endowment?
An endowment provides a permanent source of monetary support for the university’s students, faculty and programs. The expectation is that an endowment is a fund that is invested and never touched. Through these investments a percentage of the gains are distributed to a spending account for use by the campus account holder, college, department, program, etc.
What is the value of the Cal State Fullerton Philanthropic Foundation (CSFPF) endowment?
The current value (as of October 2021) of the endowment is approximately $130 million and includes more than 400 individual funds with unique donor restrictions and designations. While every endowed fund is tracked separately (called “unitized”), these assets are pooled and invested collectively. When donors make endowed gifts, each fund is added to the CSFPF endowment pool. The value of each fund reflects the ongoing investment returns from the point at which they entered the pooled investment fund.
What is a quasi-endowment?
A quasi-endowment is the same as the endowment noted previously, but with a quasi-endowment the college account holder can have access to the principal if desired. With a traditional endowment the principal is never to be accessed. A quasi-endowment fund is invested with the overall endowment investment pool.
Who manages the endowment?
The Cal State Fullerton Philanthropic Foundation board of governors has a fiduciary responsibility over the endowment and receives reports on its activities at each meeting. More direct management is done via the Finance & Investment Committee of the CSFPF board of governors, which meets four to eight times a year to review the investment strategy. The Finance & Investment Committee works with Goldman Sachs, who also has a fiduciary responsibility over the CSFPF funds, serving as an independent investment adviser in partnership with the Finance & Investment Committee.
When making investment decisions, the Finance & Investment Committee balances the need for endowment earnings with a focus on long-term performance. Investments are diversified — including domestic and international equities, fixed-income investments and alternative investments — and are designed to accept a prudent amount of risk while maximizing total return.
What is the difference between the “book” value and the “market” value of the endowment?
The “book” value of an endowment is the amount of the gift, plus any ongoing direct gifts given to the CSFPF, and the “market” value is the amount of the endowment fund when considering the market gains. For example, a donor gives $100,000 and that is the book value of the fund. After several years of investment returns, the market value of that same $100,000 might be $110,000.
Why does the value of an endowment fund fluctuate?
All endowment funds are invested in a variety of vehicles to manage risk and maximize returns. However, all investments have the possibility to decrease as well as increase. New gifts to a fund as well as investment earnings can increase the book value of a fund. All gains to a fund, minus the fees and distributions to the spending accounts, are reinvested back into each individual fund’s market value.
What is the historical endowment performance?
The Finance & Investment Committee reviews the asset allocation and risk of the endowment funds quarterly, at a minimum, to ensure we are responding to and prepared for market conditions. When considering the FY 2012-13 through FY 2020-21, the average rate of return has been 8.09%.
What are the fees associated with an endowment in the CSFPF?
To fund ongoing expenses of the Cal State Fullerton Philanthropic Foundation, such as the annual audit and fundraising programs, an endowment fee of 1.25% is assessed to all endowment accounts. The fee is calculated by applying the 1.25% rate to the five-year moving average market value of the endowment and is exclusive of the endowment distribution.
What is the endowment’s distribution rate?
The annual distribution rate is recommended by the Finance & Investment Committee to the board of governors twice a year (September and February). Consideration is given to market conditions, the distribution levels of peer institutions and the level of real return over a rolling twenty-quarter (five-year) time period. The twenty-quarter rolling average is used to smooth out any spikes or sharp declines within the financial markets.
The distribution rate currently is 3% and is applied to the five-year moving average market value. The use of a rolling twenty-quarter time period and the expectation of infrequent adjustments to the distribution rate are intended to provide relatively stable distribution allocations.
Where do the distributions go?
The endowment distributions are deposited into the scholarship or program distribution (sometimes called “spending”) account that has the same use restrictions as the endowment. The funds can then be spent from that distribution account by the account administrators. If the funds are not spent, the distributions can remain in the distribution account or can be reinvested into a quasi-endowment account.
Can distributions be suspended?
Yes. University account holders may request to suspend distributions. Suspended distributions will be reinvested into the endowment instead of being deposited into a distribution account.
Is it possible that an endowment won’t make a distribution?
Yes. The board of governors may suspend distributions when the endowment’s fair market value is less than the historic gift value. However, the CSFPF is extremely unique in that it also maintains a distribution reserve to provide a source of reliable funding for spending accounts in the event of extraordinary conditions. The Investment Policy Statement (IPS) notes that the CSFPF has a goal of maintaining at least two years’ worth of estimated distribution. The dollar figure is based on the prior fiscal year’s distribution totals. In other words, regardless of market conditions, the CSFPF will have the money to fund two years’ worth of distribution to campus accounts based on the previous year’s distribution.
Is there a minimum amount needed to create an endowment?
An endowment is created by a gift or bequest from a donor. The current minimum threshold amount for an endowment is $25,000, and $35,000 for scholarship endowments. The reason for the larger amount for endowed scholarships is to accommodate potential increases in tuition as well as to create more impact for the student. Gifts to an endowment may be funded over a period of years to achieve the minimum level required. The amount needed to endow a specific purpose (i.e., scholarship, professorship or program) is based on a naming policy that provides minimum amounts for the various impacts sought through these donor investments.
How long does it take for a newly established endowment fund to provide a distribution?
When the fund reaches its threshold and becomes invested, the spendable amount is available the following fiscal year based on the number of invested quarters. In general, a full distribution will happen after four quarters of the full endowment being invested.
When donors receive their annual endowment report, will they see a report with figures from both accounts, or will they receive combined amounts for the market/book/distribution?
The matching and true endowment balances will be combined on the annual endowment report insert.
How do I find out the current value of my endowment?
The CSFPF, in collaboration with the unit- or college-based development team, will develop an annual endowment report. In addition, if donors have questions about their endowment, they are encouraged to reach out to the director of development in their unit or college.