Q: What is an endowment fund?

A: Endowment refers to assets that are invested in perpetuity, unlike expendable funds which are typically used for immediate needs.

An endowment fund is a permanent, self-sustaining source of funding. Endowment assets are invested. Each year, a portion of the value of the fund is paid out to support the fund’s purpose, and any earnings in excess of this distribution are used to build the fund’s market value. In this way, an endowment fund can grow and provide support for its designated purpose in perpetuity.

The foundation’s endowment is not, as many may think, a single “pot” of money that can be used as the University wishes. In fact, many separate endowed funds comprise the endowment, and each has its own criteria about how and for what purpose the income may be used, as specified by the donor. As the Foundation’s endowment grows through prudent investment management and new gifts, the endowment will help to ensure the strength and stability of the University for future generations. When you establish an endowment fund, you create a permanent legacy of support for James Madison University.

Supporting Endowments

Q: How much money does it take to start an endowment?

A: The university has set different minimum funding levels for different types of endowment as listed below. Endowments intended for specific purposes might require funding at higher levels. These will be determined by appropriate university leadership on a case-by-case basis.

  • $25,000 will establish a general unrestricted endowment that provides unrestricted support to be allocated as needed at the discretion of the university president or his/her designees.

  • $50,000 will establish a general restricted endowment. The donor can place restrictions on the purposes for which the endowment’s income can be used.


Scholarship Endowments
  • $25,000 will establish an undesignated scholarship endowment that is awarded at the discretion of the Office of Financial Aid & Scholarships.

  • $50,000 will establish a named restricted scholarship endowment that is awarded to students based on donor-defined criteria that are within the university’s guidelines. Examples of such criteria include specific degree majors, financial need or certain academic requirements.


Faculty Support
  • $25,000 will establish a general use faculty support endowment. The income from this endowment is available to the Office of the Provost, the dean of a college, or the director of a program to be spent at their discretion to meet the highest priority needs for faculty support each year.

  • $50,000 will establish a named faculty support endowment to be awarded based on specific restrictions designated by the donor that are within the university’s guidelines.

  • $150,000 will establish an endowed faculty fellowship to support research, curriculum development, travel to conferences and professional meetings to present their work, and for other activities essential to their professional development.

  • $250,000 will establish an endowed named professorship to be awarded at the discretion of the provost and that recognizes professors by supplementing their salaries and giving them support for research, program and professional development.

  • $500,000 will establish an endowed named distinguished professorship to be awarded based on the specific restrictions designated by the donor that are within university guidelines. Distinguished professorships supplement professors’ salaries and give them support for their research, program and professional development.

  • $1,000,000 will establish an endowed faculty chair that is awarded based on specific restrictions designated by donors that are within university guidelines. Endowed faculty chairs enable the University to recruit and retain the most outstanding professors. Income from the endowment provides a salary supplement as well as research and program support.


Athletics
  • $25,000 will establish an undesignated athletic scholarship endowment.

  • $50,000 will establish a restricted athletic scholarship endowment that is awarded to student athletes based on donor-defined criteria that are within the university’s guidelines. Examples include specific sports, geographic preferences and academic requirements.


Q: Whose name is on the endowment?

A: If you meet the specified funding level, you can name an endowment for yourself, your family, your friend, your favorite professor, your company – the choice is yours.


Q: What else does it take?

A: An endowment agreement. This agreement between the donor, the Foundation and the university permanently defines the purpose of the fund.


Q: Do I need to sign an endowment agreement or meet a minimum gift level if I want to give to an existing endowment?

A: No. You can make a gift of any size to an existing endowment fund without signing an endowment agreement. There may be an existing endowment that reflects your interests and to which you can add your support. Also, many donors who have established endowment funds in the past continue making gifts to them over time. The larger a fund is, the more it provides in support each year.

Stewardship

Q: How do I find out about my endowment after I have made my gift?

A: Once an endowment reaches the minimum funding level and starts generating spendable income, the Office of Donor Relations will begin sending you annual reports detailing the value and use of your endowment fund. Scholarship endowment donors learn about their student recipients, and faculty support donors are updated on news about that academic area. Establishing an endowment creates a lifelong relationship between JMU and the donor - and later the donor’s family - and it is important to let you know how your gift is being used to make a difference at James Madison University.


Q: Can I meet the students who benefit from my scholarship?

A: The Office of Donor Relations hosts an annual Stewardship Luncheon that brings together donors and student scholars. If you do not have an opportunity to meet your student at this event, the Office of Donor Relations can arrange a visit for you during some other time when you are on campus.


Q: What is the Foundation’s spending policy?

A: The foundation’s endowment spending policy is set from time to time by the Board of Trustees at the recommendation of the Investment Committee. The foundation’s target policy spending rate is 5.0% of a 12-quarter moving average of the endowment's market value. A 12-quarter moving average provides greater predictability in budgeting by smoothing the impact on distributions of year-to-year market fluctuations. In periods of extreme high or low returns, the Investment Committee may recommend limiting or supplementing the distribution to smooth the effect of market fluctuations and protect the purchasing power of the endowment. Of the distribution rate, 4% is made available for the endowment’s purpose and 1% is used for management and operation expenses.

Investment Management

Q: Who manages the foundation’s endowment assets?

A: The foundation’s Investment Committee is responsible for the management and oversight of endowment assets. The Investment Committee acts in the best long-term interests of the foundation to develop an investment strategy that optimizes investment return at an acceptable level of investment risk. Objectives of the Investment Committee include preservation of capital, preservation of purchasing power, ability to fund programs and growth of endowment assets.  

The Investment Committee employs a professional investment advisor, Monticello Associates, to advise on matters related to the design, construction and implementation of the endowment investment portfolio.


Q: What is the investment strategy for endowment assets?

A: An endowment is meant to last in perpetuity and will participate in the rise and fall of many market cycles. By focusing on long-term objectives, the Investment Committee employs an investment strategy that globally diversifies investments across multiple markets, asset classes and management styles.

The foundation retains independent professional money managers for the different asset classes. These asset classes include equities, fixed income, hedged equity and absolute return, as approved by the Investment Committee.

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