What is an endowment?
An endowment is a fund created by gifts totaling at least $25,000 that are permanently set aside by the Upstate Medical Alumni Foundation, Inc. to provide benefits to students, faculty or programs generations.
For endowed funds, the principal (historical dollar value) must be invested and only a fraction of the income may be expended to carry out the donor's purpose. To protect against inflation or market decline, the remaining portion of investment return is then added to the earnings reserve. The goal is to ensure that the fund maintains its purchasing power over time to support future generations.
Note on minimum funding of endowments: Contributions exceeding $25,000 (including additional contributions made in the years following fund establishment) are added to endowment's contributing principal unless designated for current use in writing by the donor.
How are endowment investments managed by the Upstate Medical Alumni Foundation?
Endowments are invested by the Upstate Medical Alumni Foundation according to the investment guideline policy which is reviewed and approved annually by the Foundation Board of Directors Finance Committee. Currently, two investment managers, selected by the Finance Committee, manage the Foundation's endowment assets.
The Foundation strives to preserve both the historical dollar value and the spending power of the endowments. Asset allocation is the basis of the endowment's investment policy and a key responsibility of the Finance Committee of the Foundation's Board of Directors. A pdf of the Foundation's investment guideline policy can be found here.
How is spending determined? What is the relationship between overall investment return and the "spending" on an endowment?
The spending policy is set by the Finance Committee of the Upstate Medical Alumni Foundation Board of Directors. Endowment spending is generally computed on a three-year average of net assets as of December 31 to determine payout for the following year. The spending rate is currently five percent.
What happens when investment returns are negative?
An endowment can spend from prior years' excess returns (also referred to as earnings reserves or realized gain). If there are no earnings reserves available, there can be no spending in that year.
How soon will new endowments begin awarding earnings?
New endowments must be invested for at least three years to be eligible for spending. However, funds must first have appropriate earnings reserves to support spending.
What happens to any "excess returns" in the endowment?
Any earnings beyond the amount needed for scholarship/programmatic spending are added back to earnings reserves to promote growth and protect against inflation and market declines for future awards.
What is an "underwater" endowment?
"Underwater endowments" are those where the market value of the endowment is less than its historic dollar value.
How will spending occur if an endowment is "underwater"?
Spending will NOT occur in "underwater" endowments, as required under UMIFA. A donor may make a current gift to support immediate need in that year if an endowment fund is underwater.
Can an endowment be designated for a specific purpose?
Absolutely – as with any gift to the Upstate Medical Alumni Foundation, an endowed gift offers alumni and friends the opportunity to have their names, or the name of a loved one, linked to an area of the University in which they have a special interest.
- Donors create scholarships ensuring students with the highest financial need are the first priority.
- Donors create scholarships to award students based on academic merit.
- Donors establish scholarships to aid deserving students interested in pursuing a certain career path/medical specialty.
- Donors choose to direct their gifts to areas or programs of special concern to them.
There are many ways to fund an endowment within the Upstate
Medical Alumni Foundation. Please contact us if you have questions at firstname.lastname@example.org or
at 315 464-4361.