What is an Endowment?
WHAT IS AN ENDOWMENT AND WHY ARE THEY IMPORTANT?
An endowment is an investment in the future of the University of South Carolina Lancaster. It is a permanent gift that provides one of the most secure sources of future revenue for the campus and provides vital support for students, faculty, and programs. Endowments are the most lasting way a donor can give. They forever benefit the mission of the campus and ensure excellence in perpetuity.
HOW DO ENDOWMENTS WORK?
Endowment funds are managed to provide a permanent source of income to support the educational mission of a college or university. The endowment, a set of pooled assets, is generally comprised of many individual funds and is invested in a purposeful and accountable manner to generate income that will:
• honor the donors’ intended purposes for their gift;
• support the operating budget of the institution; and,
• be re-invested to protect the value of the endowment against inflation.
HOW DO I CREATE AN ENDOWMENT?
It is simple. Contact the Office of University Advancement at 803-313-7460, and we will draft a brief Gift Agreement that will govern your gift according to your wishes. You can designate your endowment for a specific purpose as long as it is consistent with University policy and state and federal laws. Once a gift is accepted, the conditions of the gift are followed in perpetuity. You can also add to your endowment at any time through additional gifts, investments, and earnings.
HOW IS THE SPENDING ALLOCATION DETERMINED?
Once your endowment is fully funded and invested for at least one fiscal year, an annual spending allocation will be calculated for your fund. Waiting at least one fiscal year allows your endowment to earn investment returns to support spending and increases the probability of an annual increase in the amount available to spend from your endowment. If, after the first year, the investment return of the endowed gift does not exceed the original amount, then no initial spending allocation is allowed.
The annual spending allocation is based on a predetermined rate applied to the average balance of your endowment. The current spending rate is 4.5 percent. The average balance of your endowment is calculated using the previous monthly balances. This averaging helps smooth the effects of market fluctuations. Unused spending allocations are carried forward to be used in subsequent years. Investment return in excess of the spending allocation is retained within the endowment, increasing its size over time and, therefore, increasing the amount of support generated for the donor’s specified program.
HOW DOES THE MARKET AFFECT MY ENDOWMENT ACCOUNT?
The amount of earnings added to the fund fluctuates with the markets. Although the portfolio is well diversified, some investments might occasionally lose value. The spread of the investment allocation helps to compensate for losses by a particular style of investment and takes advantage of earnings that can be realized when an investment style is in favor with the market.
WHAT DOES IT COST TO CREATE AN ENDOWMENT?
Scholarships require a minimum gift of $10,000 to establish an endowed scholarship fund designated for specific academic disciplines/program with restrictions and/or preferences. Other designated funds may require a larger minimum gift in order to provide adequate income to achieve the donors’ goals.
--USC Endowment Report 2009-2010
USCL Office of Advancement
P. O. Box 889, Lancaster, SC 29721
Hubbard Hall 235
General Information: 803-313-7460