Endowment FAQs
If you’d like to know more about CSFPF’s endowments or how you can make a gift, email foundation@fullerton.edu or visit https://foundation.fullerton.edu/endowment
List of FAQs
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 September 2024) of the endowment is approximately $157 Million and includes more than 500 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 on-going investment returns from the point in which they entered the pooled investment fund.
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 governance by 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 investment management of the CSFPF funds, to serve as an independent investment advisor 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 including income risk, asset risk, and liquidity risk. 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.
Is ESG considered in the endowment?
The Investment Policy of the CSFPF, which was approved by the CSFPF Board of Governors, provides broad guidance with respect to Environmental, Social, and Governance (ESG) factors. The CSFPF Board of Governors expects consideration of ESG factors to be integrated into the investment decision processes of the CSFPF. The Foundation’s Office Staff, Goldman Sachs, and the CSFPF Investment Committee monitor how CSFPF’s investment management integrates consideration of ESG factors into the investment process.
How is ESG considered?
The CSFPF Investment Committee reviews annual reports provided by its investment advisor on metrics that track the Endowment’s consideration of ESG. Below are examples of ESG portfolio metrics that may be used:
- No Poverty
- Zero Hunger
- Good Health and Well-Being
- Quality Education
- Gender Equality
- Clean Water and Sanitation
- Affordable and Clean Energy
- Decent Work and Economic Growth
- Industry, Innovation and Infrastructure
- Reduced Inequalities
- Sustainable Cities, and Communities
- Responsible Consumption and Production
- Climate Action
- Life Below Water
- Life on Land.
Is the CSFPF endowment pool invested in funds with sustainable investing strategies?
Yes, currently approximately 15% of the endowment portfolio is invested in an investment-grade fixed income strategy that incorporates an ESG overlay. This strategy seeks out green, social, and sustainable bonds where possible, while also restricting bonds from issuers that may be deemed objectionable by the endowment’s investment advisor.
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) and 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 3.5% and is applied to the twenty-quarter 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.
For FY2024-25, the endowment distributed $4.6 million to spendable accounts.
Where do the distributions go?
The endowment distributions are deposited into the scholarship or program distribution (sometimes call “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 at least two years estimated distribution. The dollar figure is based on the prior fiscal year distribution totals. In other words, regardless of market conditions, the CSFPF will have the money to fund two years of distribution to campus accounts based on the previous year’s distribution.
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.
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. In addition, 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, at a minimum, quarterly, to ensure we are responding to and prepared for market conditions. When considering the FY 2012-13 through FY 2023-24, the average rate of return has been 7.2%.
What are the fees associated with an endowment in the CSFPF?
To fund on-going expenses of the Cal State Fullerton Philanthropic Foundation, such as the annual audit and fundraising programs, an endowment fee of 1.4% is assessed to all endowment accounts. The fee is calculated by applying the 1.4% rate to the five-year moving average market value of the endowment and is exclusive of the endowment 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 $35,000 for scholarship endowments. The reason for the larger amount for endowed scholarships is to accommodate for 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.
Can an endowment be created if it is uncertain if the minimum threshold to create an endowment will be met?
Donated funds can be accumulated in a campus program or scholarship account as giving builds to the endowment threshold. Funds will be deposited into a build-to-endowment account. When the endowment threshold is met, an endowment account can be established. Funds will be transferred from the build-to-endowment account into the newly established endowment account.
How long does it take for a newly established endowment fund to provide a distribution?
When the fund reaches its threshold, either through pledges or fulfilled gifts, its funds are invested and become eligible for distribution. The distribution becomes available in the following fiscal year, determined by the number of quarters invested. For example, an endowment invested in April will pay out on a prorated basis in September.
How do new endowment gifts get unitized?
Each new gift coming into the endowment will “purchase” endowment units equal to the average market dollar value during the quarter).
