Creating an Endowment / Scholarship

How endowments work
Endowment funds for the benefit of WVU are held by the WVU Foundation, a 501(c)(3) organization whose purpose is to receive and manage private contributions for the benefit of the University.

Endowments can be designated by the donor to impact a specific program or area within the University (including West Virginia 4-H, the Mountaineer Athletic Club and Potomac State College), or remain unrestricted to meet the most critical needs of the University. Donors can name a new endowment, and many choose to honor a loved one, recognize a favorite professor or create the endowment in their own name. Gift minimums apply to certain projects.

Donors may use either outright gift or deferred gift vehicles to establish named endowed funds. Outright gifts of cash or stock can be made completing the endowment immediately, or through a pledge over a period of up to five years. Deferred or planned gifts such as bequests, income producing gifts, life insurance and retirement assets can also be used to establish an endowment in the future when the gift is received.
 

 

Businessman and philanthropist Ming Hsieh observes students in WVU’s Forensic and Investigative Science program. Through endowments, Hsieh has established two professorships at WVU in the field of forensic science.

The WVU Foundation staff works with each donor, on an individual basis, to tailor both the type of asset used and in preparing the guidelines for the administration of each endowed fund.

The purpose of an endowment is to provide ongoing support for the current and future activities of WVU and its affiliates. It is, therefore, a perpetual, self-sustaining source of permanent funding for the benefit of WVU. Each year, a portion of the endowment’s earnings are paid out, while the principal (or corpus) is retained for future growth. As a result, it is imperative that the endowment grow its investment assets at a real (inflation-adjusted) rate that is sufficient to support an annual spending stream and preserve the purchasing power of the endowment in perpetuity.

The two key ingredients that are required for the endowment to grow its assets are: 1) new gifts and 2) investment performance. In order to achieve the latter, it is necessary to aggressively manage the endowment’s investment portfolio so that, over the long-term, it can generate net absolute returns in excess of the required spending payout, thereby creating intergenerational equity.

From an investment perspective, the endowment’s funds are pooled, or commingled, together in a manner similar to a mutual fund. The pooled investment fund is managed by professional investment managers and overseen by the Foundation’s Investment Group. The WVU Foundation utilizes unitized investment accounting, which permits individual endowment funds to retain their identity, while sharing proportionately in the earnings of the commingled investment fund. As a result of this pooling of funds, the endowment’s investment portfolio is broadly diversified across many asset classes and among many investment managers, thereby reducing volatility while maximizing performance. Diversification is the key driver behind the successful long-term growth of the endowment through market cycles.

WVU Foundation Endowment Spend Policy

Endowment spend is defined as the dollar amount moved annually from each endowed fund within the endowment investment pool to the respective endowed fund’s cash account from which the respective endowed fund “owner” may expend funds meeting the endowed fund’s stated purpose.

The WVU Foundation Endowment Spend Policy has been established to meet two, somewhat counterbalancing, financial stewardship objectives:

1. Support current educational and scholarly activities of the University
2. Provide for continuation of the fund so as to provide support of equal value for future needs of similar educational and scholarly activities of the University

WVU Foundation endowment spend is determined annually using the Endowment’s financial activity including investment performance for the calendar year and the Endowment’s financial position as of December 31.  Since 2004, the WVU Foundation Endowment has utilized a banded inflation approach to determining the amount of endowment spend.  

A generous legacy gift made by late WVU alumna Carol Diane Cook Elder is creating an endowed scholarship for students in the College of Human Resources and Education's five-year teacher education program.

Endowment spend is calculated annually in total and for each endowed fund as follows:

1. The prior year’s calculated spend amount is adjusted by the trailing twelve-month inflation rate to provide for the impact of inflation.
2. The current year calculated spend amount is compared to the market value of the endowment investments market value to assure that the calculated spend is no less than 4% of market value and no more than 6% of market value. 
3. Endowment spend will be paid from accumulated income (interest and dividends) and appreciation. If the fund is underwater -- that is, the market value is less than the historical gift value -- spend is limited to the amount available in the accumulated income account.

Endowment spend is declared each February by the WVU Foundation Board. The amounts are announced to the University by March 1 and the endowment spend is released on July 1.

The WVU Foundation Endowment Spend Policy is reviewed by the Foundation annually. 

Scholarship endowments
More information on scholarship endowments

WVU Foundation endowment minimums