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.
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.
Endowment Spend Policy
One of the West Virginia University Foundation's most important responsibilities is the management and investment of endowments which are created by donors with the intent of providing permanent support for the University. As such, these funds are invested by the WVU Foundation so that a gift today will fund a donor's objective on an ongoing basis. In establishing the Spend Policy, the Foundation seeks to provide a consistent level of funds each year for the University's use in meeting the endowment's purpose (Endowment Spend) while assuring that over time the value of the endowment will maintain its purchasing power.
Endowment Spend is distributed annually from each qualifying endowment's invested funds to its spendable cash account and is available for use by the University to fulfill the endowment's stated purpose.
Endowment Spend Calculation
The WVU Foundation uses a banded inflation method to determine the amount of Endowment Spend. This method is expected to provide Endowment Spend that keeps pace with inflation while maintaining the value of the original gift over time. Endowment Spend for the 2013 fiscal year (July 1, 2012 – June 30, 2013), will be determined as follows:
- Each endowment's calculated 2012 Endowment Spend will be adjusted by the trailing twelve-month inflation rate to provide for the impact of inflation. This amount is the Proposed 2013 Endowment Spend.
- The Proposed 2013 Endowment Spend will be compared to the December 31, 2011market value of the individual endowment's invested funds. Endowment Spend must be no less than 4% and no more than 5% of the market value of the endowment's invested funds as of December 31, 2011. If the Proposed Endowment Spend amount exceeds 5% of the market value, it will be reduced to 5%. If it is less than 4% of the market value, it will be increased to 4%. This amount is the Calculated 2013 Endowment Spend.
- Endowment Spend will be paid according to the following schedule:
- An endowment with a December 31, 2011 market value in excess of original gift value provided full spend.
- An endowment with a December 31, 2011 market value below original gift value by 5% or less provided full spend.
- An endowment with a December 31, 2011 market value below original gift value more than 5% and no more than 20% provided spend at a fixed rate of 2.5% of market value.
- An endowment with a December 31, 2011 market value below original gift value of more than 20% provided no spend this year.
- Endowments created between January 1, 2011 and December 31, 2011 are eligible to receive Endowment Spend for the first time for use by the University in the 2013 fiscal year. Endowment Spend for new endowments was set at 4% of December 31, 2011 market value for the first year only. Endowment Spend for subsequent years will be calculated according to spend policy.
- On July 1, 2012, Endowment Spend for the 2013 fiscal year (July 1, 2012 – June 30, 2013) will be made available for expenditure from individual endowment funds.
The WVU Foundation Board of Directors reviews the Foundation's Endowment Spend Policy annually.
More information on scholarship endowments
WVU Foundation Endowment Minimums
|Named Scholarship Program||$1,000,000|
|Faculty Enrichment Fund||$50,000|
|Student Enrichment Fund||$25,000|
|Library (Endowment) Acquisitions Fund||$10,000|
|* Supplements institutional base salary and relates expenses|
|Note: Individual college's and school's endowment minimums may differ due to special financial consideration. Donors should consult the individual college's or school's website for a listing of its endowment minimums.|