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{{Short description|Legal structure for managing investments}}[[File:A Westerly View of the Colledges in Cambridge New England by Paul Revere.jpeg|upright=1|thumb|250px|Engraving of [[Harvard College]] by [[Paul Revere]], 1767. [[Harvard University endowment|Harvard University's endowment]] was valued at $53.2 billion {{as of|2021|lc=y}}.<ref name="Endowment">{{cite web |last1=Ma |first1=Virginia |title=Harvard's Endowment Soars to $53.2 Billion, Reports 33.6% Returns |url=https://www.thecrimson.com/article/2021/10/15/endowment-returns-soar-2021/ |website=The Harvard Crimson |access-date=October 14, 2021 |archive-date=October 14, 2021 |archive-url=https://web.archive.org/web/20211014171054/https://www.thecrimson.com/article/2021/10/15/endowment-returns-soar-2021/ |url-status=live }}</ref>]]
A '''financial endowment''' is a legal structure for managing, and in many cases indefinitely perpetuating, a pool of [[Financial instrument|financial]], [[real estate]], or other investments for a specific purpose according to [[Donor intent|the will of its founders and donors]].<ref name="Kenton">{{cite web|url=https://www.investopedia.com/terms/e/endowment.asp|title=Endowment|first=Will|last=Kenton|website=Investopedia}}</ref> Endowments are often structured so that the inflation-adjusted [[principal (finance)|principal]] or "corpus" value is kept intact, while a portion of the fund can be (and in some cases must be) spent each year, utilizing a prudent spending policy. [[File:
Endowments are often governed and managed either as a [[Nonprofit organization|nonprofit corporation]], a [[Foundation (nonprofit)|charitable foundation]], or a [[private foundation]] that, while serving a good cause, might not qualify as a public charity. In some jurisdictions, it is common for endowed funds to be established as a [[trust (law)|trust]] independent of the organizations and the causes the endowment is meant to serve. Institutions that commonly manage endowments include academic institutions (e.g., [[college]]s, [[universities]], and [[private school]]s); cultural institutions (e.g., museums, libraries, and theaters); service organizations (e.g., hospitals, retirement homes; the [[International Red Cross and Red Crescent Movement|Red Cross]]); and religious organizations (e.g., churches, synagogues, mosques).
Private endowments are some of the wealthiest entities in the world, notably [[Lists of institutions of higher education by endowment size|private higher education endowments]]. [[Harvard University endowment|Harvard University's endowment]] (valued at $53.2 billion {{as of|2021|June|lc=y}})<ref name="Harvard Endowment">{{cite web|last=|first=|date=2021-10-14|title=Harvard's Endowment Soars to $53.2 Billion, Reports 33.6% Returns|url=https://www.thecrimson.com/article/2021/10/15/endowment-returns-soar-2021/|access-date=2021-10-14|website=The Crimson|language=en}}</ref> is the [[List of colleges and universities in the United States by endowment|largest academic endowment]] in the world.<ref>{{cite web|url=http://www.ibtimes.com/ivy-league-endowments-2015-princeton-university-top-harvard-struggles-low-investment-2131005 |title=Ivy League Endowments 2015: Princeton University On Top As Harvard Struggles With Low Investment Return |publisher=Ibtimes.com |date=2010-05-10 |accessdate=2022-07-18}}</ref><ref>{{cite news | url=https://www.wsj.com/articles/is-taxing-harvard-yale-and-stanford-the-answer-to-rising-college-costs-1462385402 | title=Is Taxing Harvard, Yale and Stanford the Answer to Rising College Costs? | newspaper=Wall Street Journal | date=4 May 2016 }}</ref>
==Types==
Most private endowments in the United States are governed by the [[Uniform Prudent Management of Institutional Funds Act]] which is based in part on the concept of [[donor intent]] that helps define what restrictions are imposed on the principal and earnings of the fund. Endowments in the United States are commonly categorized in one of three ways:<ref name="Kenton"/>
▲2. Quasi endowment funds are designated endowments by an organization's governing body rather than by the donor. Therefore, both the principal and the income may be accessed at the organization's discretion. Quasi endowment funds are still subject to any other donor restrictions or intent.<ref>{{cite journal | title =Not-for-Profit Organizations |journal = AICPA Audit and Accounting Guide | page = 367 | publisher = [[American Institute of Certified Public Accountants]] | date =May 1, 2007 }}</ref>
▲3. Term endowment is created with a gift or funds set aside by the board which can be spent in their entirety upon a set date or occurrence, such as the death of the donor.<ref name=newman />
All endowments ensure that the original principal, inflation-adjusted, is held in perpetuity and prudent spending methods should be applied in order to avoid the erosion of corpus over reasonable time frames. Restricted endowments may also facilitate additional donor requirements.
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The earliest universities were founded in Europe, Asia and Africa.<ref name="Rüegg">Rüegg, Walter: "Foreword. The University as a European Institution", in: ''A History of the University in Europe. Vol. 1: Universities in the Middle Ages'', Cambridge University Press, 1992, {{ISBN|0-521-36105-2}}, pp. XIX–XX.</ref><ref name="Hunt Janin 2008">Hunt Janin: "The university in medieval life, 1179–1499", McFarland, 2008, {{ISBN|0-7864-3462-7}}, p. 55f.</ref><ref name="books.google.com">de Ridder-Symoens, Hilde: [https://books.google.com/books?id=5Z1VBEbF0HAC ''A History of the University in Europe: Volume 1, Universities in the Middle Ages''], Cambridge University Press, 1992, {{ISBN|0-521-36105-2}}, pp. 47–55</ref><ref name="britannica1">''[[Encyclopædia Britannica]]'': [https://www.britannica.com/EBchecked/topic/618194/university "University"] {{webarchive|url=https://web.archive.org/web/20130515232213/https://www.britannica.com/EBchecked/topic/618194/university |date=15 May 2013 }}, 2012, retrieved 26 July 2012)</ref><ref>Verger, Jacques: "Patterns", in: Ridder-Symoens, Hilde de (ed.): ''A History of the University in Europe. Vol. I: Universities in the Middle Ages'', Cambridge University Press, 2003, {{ISBN|978-0-521-54113-8}}, pp. 35–76 (35)</ref><ref>''Civilization: The West and the Rest'' by Niall Ferguson, Publisher: Allen Lane 2011 – {{ISBN|978-1-84614-273-4}}</ref> Their endowment by a prince or monarch and their role in training government officials made early Mediterranean universities similar to Islamic [[madrasa]]s, although madrasas were generally smaller, and individual teachers, rather than the madrasa itself, granted the license or degree.<ref>{{Citation | last = Pryds | first = Darleen | editor-last = Courtenay | editor-first = William J. | editor2-last = Miethke | editor2-first = Jürgen | editor3-last = Priest | editor3-first = David B. | date = 2000 | title = Universities and Schooling in Medieval Society | chapter = ''Studia'' as Royal Offices: Mediterranean Universities of Medieval Europe | series = Education and Society in the Middle Ages and Renaissance | volume = 10 | publisher = Brill | location = Leiden | pages = 96–98 | isbn=9004113517 }}</ref>
[[Waqf]] ({{lang-ar|وَقْف}}; {{IPA
{{Blockquote|text=Ibn Umar reported, [[Umar|Umar Ibn Al-Khattab]] got land in [[Khaybar]], so he came to the prophet [[Muhammad]] and asked him to advise him about it. The Prophet said, 'If you like, make the property inalienable and give the profit from it to charity.'" It goes on to say that Umar gave it away as alms, that the land itself would not be sold, inherited or donated. He gave it away for the poor, the relatives, the slaves, the [[jihad]], the travelers and the guests. And it will not be held against him who administers it if he consumes some of its yield in an appropriate manner or feeds a friend who does not enrich himself by means of it.<ref>Ibn Ḥad̲j̲ar al-ʿAsḳalānī , Bulūg̲h̲ al-marām, Cairo n.d., no. 784. Quoted in Waḳf, ''Encyclopaedia of Islam''.</ref>|source=Ibn Ḥad̲j̲ar al-ʿAsḳalānī , Bulūg̲h̲ al-marām, Cairo n.d., no. 784}}
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===Endowed professorships===
An endowed [[professor]]ship (or '''endowed chair''') is a position permanently paid for with the revenue from an endowment fund specifically set up for that purpose. To set up an endowed chair generally costs between US$1 and $5 million at major research universities.<ref>{{Cite web |title=
===Endowed faculty fellowships===
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== Charitable foundations ==
[[Image:Ford Foundation HQ jeh.JPG|thumb|[[Ford Foundation Building]] in New York. In 2014, The [[Ford Foundation]] reported assets of US$12.4 billion and approved US$507.9 million in grants.<ref>{{cite web| url=http://www.fordfoundation.org/grants| title=Grants| publisher=Ford Foundation| access-date=2014-05-14 |url-status=live |archive-url= https://web.archive.org/web/20140626060458/http://www.fordfoundation.org/grants |archive-date= Jun 26, 2014 }}</ref>]]
{{ See also | Foundation (nonprofit) | List of wealthiest charitable foundations }}
A foundation (also a charitable foundation) is a category of [[nonprofit organization]] or [[charitable trust]] that will typically provide funding and support for other [[charitable organization]]s through grants, but may engage directly in charitable activities. Foundations include public charitable foundations, such as [[community foundation]]s, and [[private foundation]]s which are typically endowed by an individual or family. The term foundation though may also be used by organizations not involved in public grant-making.<ref>{{cite web|url=http://grantspace.org/tools/knowledge-base/Funding-Resources/Foundations/what-is-a-foundation |title=What is a foundation | Foundations | Funding Resources | Knowledge Base | Tools |website=GrantSpace
== Fiduciary management ==
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A financial endowment is typically overseen by a board of [[trustee]]s and managed by a trustee or team of professional managers. Typically, the financial operation of the endowment is designed to achieve the stated objectives of the endowment.
In the United States, typically 4–6% of the endowment's assets are spent every year to fund operations or capital spending. Any excess earnings are typically reinvested to augment the endowment and to compensate for inflation and recessions in future years.<ref name="Newsweek">{{cite web|url=http://www.newsweek.com/id/54660|title=
==Criticism and reforms==
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===Economic downturn===
Research published in the [[American Economic Review]] indicates that major academic endowments often act in times of economic downturn in a way opposite of the intention of the endowment. This behavior is referred to as
Large U.S.-based college and university endowments, which had posted large, highly publicized gains in the 1990s and 2000s, faced significant losses of principal in the [[2008 economic downturn]]. [[Harvard University endowment|The Harvard University endowment]], which held $37 billion in June 2008, was reduced to $26 billion by mid-2009.<ref>[http://www.bostonherald.com/business/general/view/20090911harvard_fund_loses_11b_decline_less_than_predicted/ Harvard fund loses $11B], a September 11, 2009 article from the ''[[Boston Herald]]'' {{webarchive|url=https://web.archive.org/web/20090915194554/http://www.bostonherald.com/business/general/view/20090911harvard_fund_loses_11b_decline_less_than_predicted/|date=September 15, 2009}}</ref> [[Yale University]], the pioneer of an approach that involved investing heavily in alternative investments such as real estate and [[private equity]], reported an endowment of $16 billion as of September 2009, a 30% annualized loss that was more than predicted in December 2008.<ref>[https://www.wsj.com/articles/SB125261190641700555 Yale Endowment Down 30%] {{webarchive|url=https://web.archive.org/web/20180414092025/https://www.wsj.com/articles/SB125261190641700555|date=2018-04-14}}, a September 10, 2009 article from ''[[The Wall Street Journal]]''</ref> At [[Stanford University]], the endowment was reduced from $17 billion to $12 billion as of September 2009.<ref>[http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/09/02/BAQ519HJA6.DTL Stanford University endowment loses big] {{webarchive|url=https://web.archive.org/web/20090906103714/http://www.sfgate.com/cgi-bin/article.cgi?f=%2Fc%2Fa%2F2009%2F09%2F02%2FBAQ519HJA6.DTL|date=2009-09-06}}, a September 3, 2009 article from the ''[[San Francisco Chronicle]]''</ref> [[Brown University]]'s endowment fell 27 percent to $2.04 billion in the fiscal year that ended June 30, 2009.<ref>{{cite web|title=Politics|url=https://www.bloomberg.com/apps/news?pid=20601103&sid=ajuf5s.QOqzY|access-date=14 April 2018|website=Bloomberg }}</ref> [[George Washington University]] lost 18% in that same fiscal year, down to $1.08 billion.<ref>[http://media.www.gwhatchet.com/media/storage/paper332/news/2009/08/27/News/Gw.Endowment.Drops.18.Percent-3758164.shtml GW endowment drops 18 percent] {{webarchive|url=https://web.archive.org/web/20090831222725/http://media.www.gwhatchet.com/media/storage/paper332/news/2009/08/27/News/Gw.Endowment.Drops.18.Percent-3758164.shtml|date=August 31, 2009}}, an August 27, 2009 article from ''[[The GW Hatchet]]''</ref>
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=== Endowment taxes ===
{{Main|Endowment tax}}
Generally, endowment taxes are the taxation of financial endowments that are otherwise not taxed due to their charitable, educational, or religious mission. Endowment taxes are sometimes enacted in response to criticisms that endowments are not operating as [[nonprofit organization]]s or that they have served as [[tax shelter]]s, or that they are [[Payment in lieu of taxes|depriving local governments of essential property and other taxes]].<ref>{{cite web|title=Ways and Means Questions Nonprofit Hospitals' Tax Status|publisher=The Commonwealth Fund 1 East 75th Street, New York, NY|url=http://www.cmwf.org/healthpolicyweek/healthpolicyweek_show.htm?doc_id=278529|access-date=2007-01-22|archive-url=https://web.archive.org/web/20061004064034/http://www.cmwf.org/healthpolicyweek/healthpolicyweek_show.htm?doc_id=278529|archive-date=2006-10-04|url-status=dead}}<br />{{cite web|author=Jill Horwitz|title=Testimony Before House Ways and Means Committee|date=2005-05-26|url=http://www.sph.umich.edu/cleh/papers/horwitz.pdf|archive-url=https://web.archive.org/web/20160305172650/https://sph.umich.edu/cleh/papers/horwitz.pdf|archive-date=2016-03-05|url-status=dead}}</ref><ref>{{cite web | last=He | first=Ray C. | title=Cambridge Seeks to Tax Earnings on Endowment | work=Volume 125, Number 44 | publisher=[[The Tech (newspaper)|The Tech]] | date=October 4, 2005 | url=http://tech.mit.edu/V125/N44/cambsurcharge.html | access-date=May 20, 2019 | archive-date=April 8, 2022 | archive-url=https://web.archive.org/web/20220408123247/http://tech.mit.edu/V125/N44/cambsurcharge.html | url-status=dead }}</ref>
==See also==
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==External links==
{{Wikidata property | P6589 }}
* [https://wayback.archive-it.org/all/20081001225440/http://fordfound.org/pdfs/impact/primer_for_grantmakers.pdf Ford Foundation: ''A Primer for Endowment Grantmakers''] (PDF)
* {{cite news|url=http://www.stanforddaily.com/2008/02/01/congress-investigates-endowment/|title=Congress investigates endowment|date=February 1, 2008|first=Kamil|last=Dada|newspaper=Stanford Daily|url-status=dead|archive-url=https://web.archive.org/web/20110609000636/http://www.stanforddaily.com/2008/02/01/congress-investigates-endowment/|archive-date=June 9, 2011}}
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