An endowment is a fund that consists of financial resources that have been donated to a nonprofit organization, like a university, for specific purposes. Cornell, like most universities, manages its endowment with the goal of ensuring that when a donor provides funds for a specific purpose there will be sufficient resources to support that purpose in perpetuity.
For example, if a donor contributes money to pay for the salary of a professor, creating a “named” professorship, the money must then be managed to cover the professor’s salary forever. To achieve this goal, the gift must be large enough that the payout in the first year covers the cost of the salary, with the principal remaining invested. (The payout is the amount of endowment dollars that the Board of Trustees approves for spending each year.) In the years and decades that follow, the original gift must grow enough so that the annual payout covers the salary and the amount that the salary will have grown due to inflation.
Endowments are thus invested for growth. They are invested in stocks, bonds and a range of other financial instruments. Cornell’s Board of Trustees, a group of 64 people – including students, employees, faculty and alumni who are elected by their respective groups – has ultimate responsibility for the endowment. Board members are all volunteers who are not paid by Cornell, with the exception of the president and the employee- and faculty-elected representatives. The Board of Trustees delegates direct oversight of the endowment to its Investment Committee, which establishes policies for managing the endowment; the Cornell University Office of Investments is responsible for implementing those policies.
The Office of Investments is best seen as a “manager of managers;” it hires and authorizes external investment managers to purchase, sell and transfer the assets of the endowment. This approach is common among universities of Cornell’s size.
The payout from the endowment is a very important source of support for the university, providing about 10% of the operating revenues for the Ithaca campus, and 7% of Cornell’s total operating revenues. More than a quarter of the endowment’s payout supports student financial aid
Comments are totally anonymous unless you identify yourself in the body of the posting.
