THE POWER OF ENDOWMENT
Generations of Impact
Despite its vital importance to public and private universities all over the world, the idea of endowment isn’t well understood beyond the boundaries of campus. But it’s a creative and powerful way for alumni and friends to make a truly resounding impact.
What is an Endowment?
In the simplest terms, an endowment gift is a donation that is kept rather than spent. Most other gifts are used quickly to meet the university’s pressing needs. But an endowed gift is invested and then managed by the UCF Foundation, an independent nonprofit organization. Each year, a portion of the earnings are spent according to the donor’s wishes — to award scholarships, for example. The remaining earnings are added to the amount of the original gift and invested so that the fund grows gradually over time.
What is a University's Endowment?
When a donor gives the university an endowment gift for a particular purpose, that gift is placed in a special named account — something like an investment account. When a university says its endowment is a certain amount, it means the total value of all endowment funds. Harvard has the largest endowment of any American university — around $40 billion, with a ‘b’. UCF’s endowment is about $162.9 million. A lot of factors help explain endowment values, but a university’s age is an important one and Harvard has a 327-year head start on us.
Why is Endowment so Important?
A university’s endowment provides a reliable source of funding for scholarships, research, faculty excellence and more. While the spendable amount generated each year may vary slightly, it remains more predictable than other funding sources. That makes the endowment a critical measure of a university’s financial strength. Additionally, funds generated by the endowment provide valuable flexibility, since they can be used in some ways that other revenue — state funding allocations, for example — can’t be. An endowed gift might be used, for instance, to supplement the compensation package for a key faculty position in order to recruit a top scholar in today’s competitive market.
Wouldn't It Make More of a Difference to Give a Gift That Can Be Spent?
In the short term, yes. Cash gifts are vitally important and allow the university to meet its most pressing needs. In the long term, though, nothing has the impact of an endowment gift. For example, a $150,000 endowment gift given 30 years ago would have provided $190,000 in scholarships by now and would still have a balance of $185,000.
What Are Endowments Used For?
In short, all sorts of things. Most donors want their endowment gifts to be used to fund student scholarships or endowed faculty positions, but other endowments at UCF do things like help pay for maintenance and upgrades to particular facilities, help care for and curate specific artistic and scientific collections, provide monetary awards for exceptional scholarships by students or faculty, provide valuable academic resources for student-athletes, and much more.