Large Endowment Funds Had a Tough Year

Challenges to Endowment Fundraising

The Wall Street Journal reported on a recent report by The Northern Trust about endowment returns for 90 endowments of $1 billion or more. The average loss this past year was 3.1%. So far Harvard University is beating the trend with a 7% to 9% return (final numbers still pending).
A down year in the market makes endowment fundraising challenging for major gift officers. If a fund is supposed to give out 5% of market value a year, what do you do when the fund is down 3% (or more)?

One answer is the usual policy of averaging your endowment market value for distribution over 12 trailing quarters. This helps to soften short term market weakness. This means for this year your organization's endowment proceeds (and foundation granting proceeds) won't be hurt too much. But if we get two or three years of flat or down numbers, endowment distributions will be hurt. Make sure you understand that your endowment distributions are not based on this year's growth but rather the market value over time.

TomWilsonMajorGiftsGuru@gmail.com

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