An endowment fund in its simplest sense is an investment fund. Schools, hospitals and non-profit organizations that are interested to venture into this kind of funding scheme must be able to find a reliable institution that will know how to manage invested capital in the most sensible way. The amount of money invested in this fund comes from donations by generous people and organizations for the benefit of some of the most important sectors in society that badly need funding. The goal of the donors is to have a portion of the donated money invested and the principal amount be kept for a period of time to ensure the longevity of the fund.
Endowment management may sound like an easy task, but there are several rules and policies that must be known before engaging in this kind of financial fund to avoid setbacks in the future:
- When a donor starts a foundation fund, the donation is expected to be invested, so as to grow in value and not remain stagnant. The donated amount of money must not remain stagnant in the hands of the organizers of the foundations or non-profit organizations.
- While it is expected that there would be day-to-day operational costs in running a foundation or non-profit organization, the agreement is that only a small portion of the foundation endowment is allotted for this. Some amount would go to certain charitable grants and the rest of the amount will be retained as a safeguard against future inflation.
- As the years will pass, donors hope to see the performance of the endowment fund growing over time like in market value.
- Another important matter to consider regarding endowments is that beforehand, the kind of endowment must already be specified either as permanent, quasi or term endowments. Moreover it must also be classified early on either as restricted or unrestricted. This will avoid any complications or misunderstandings in the future.
- The charitable fund has certain terms when it comes to the recipients of the funding. After all, this is going to be a big investment on the part of the donor. The scholarships, grants and funding will have to go through a rigorous screening before the final award would be given to the deserving individual or group.
An endowment fund can be an important driver of change in society, as it supports scientific, development and environmental causes. Socially, the fund provides opportunities for people to develop themselves through collaborations and networking. Scientifically, the fund encourages more geniuses in the scientific field to conduct thorough research that could be beneficial to many people. Developmentally, the fund can give aid to people who are going through poverty or those who do not have enough opportunities. Environmentally, the fund can support pressing environmental issues like climate change. There are many ways an endowment fund can benefit society, and that is why the people behind it should carefully follow the rules and policies regarding such funds.