ERIC Number: ED427623
Record Type: RIE
Publication Date: 1997
Reference Count: 0
Endowment Management. Financial Matters. Board Basics.
Spitz, William T.
Association of Governing Boards of Universities and Colleges
This booklet offers guidelines for college and university trustees for managing the institution's endowment funds as they seek to balance efforts to grow the endowment for the institution's future with the need to use these funds to supplement current budget needs. Critical policy issues are identified, such as: the endowment's purpose, maximizing return on assets, contribution of endowment funds to operating budgets, whether to spend or preserve endowment funds, whether the entire board or an investment committee makes investment decisions, and monitoring and evaluating the performance of professional investment managers. Since the board's most basic responsibility is preserving institutional resources, including the endowment, in perpetuity, investment objectives should result in total returns equal to or greater than the spending rate plus inflation. Three models of endowment spending are outlined: spending all the endowment's income, determining spending as a percentage of the endowment's market value, or increasing each year's spending by a stated percentage tied to growth in the operating budget or to an inflation index. Also provided are some guidelines for asset allocation, addressing especially development of a documented asset allocation strategy. Finally, some suggestions for portfolio structure, manager selection, and evaluation of the manager's performance are offered. (DB)
Descriptors: Administrator Role, Decision Making, Educational Finance, Endowment Funds, Governance, Governing Boards, Higher Education, Investment, Long Range Planning, Money Management, Resource Allocation, Trustees, Trusts (Financial)
Association of Governing Boards of Universities and Colleges. 1133 20th Street NW Suite 300, Washington, DC 20036. Tel: 800-356-6317; Tel: 202-296-8400; Fax: 202-223-7053; Web site: http://www.agb.org
Publication Type: Guides - Non-Classroom
Education Level: N/A
Audience: Administrators; Policymakers; Practitioners
Authoring Institution: Association of Governing Boards of Universities and Colleges, Washington, DC.