Endowments Ensure Support for Future Generations

Endowments create meaningful legacies. They provide a steady, predictable and perpetual source of income. Gifts to endowed funds advance the University of Alberta’s research and teaching excellence — enabling us to pursue fundamental questions and ideas, push the frontiers of knowledge, inspire creative experimentation, drive innovation and find solutions to challenges facing our society.

A gift to a university endowment fund represents a long-term investment in the future of the University of Alberta and creates a lasting legacy for the donor.

The current total value of all endowed gifts to the University of Alberta is $1.15 billion

Expendable vs. Endowed gifts

There are two types of gifts to the University of Alberta: expendable gifts and endowed gifts. In both cases the donor can decide where to direct the money.

An expendable gift is allocated immediately to its intended purpose, and has an immediate impact.

An endowed gift is invested in perpetuity, and a portion of the investment earnings are allocated to the purpose of the gift.

Planned gifts, also known as bequests (where a donor leaves a gift to the university in their estate), can be either expendable or endowed.

Creating an Endowment

A minimum gift of $25,000 is required to establish a new endowment. A new endowment can be funded over a period of up to five years, by donating $5,000 per year for five years, for example.

A gift of any amount can be added to an existing endowment.

The University’s Investment Goal: Long-term Growth

Thanks to the generous support of our donors and the university’s prudent fiscal management policies, the University of Alberta endowment grew from $640 million to $1.15 billion over the last 10 years, despite the economic downturn of 2009. During this period the endowment provided $324.6 million to 2,731 individual endowment funds.

Historically, the University of Alberta endowment has performed well because we take a prudent approach to investing. To ensure an endowment will provide the same level of economic support to future generations as it does today, the university has adopted an approach that grows the value of the endowment and ensures stable funding that increases over time.

To this end, our strategy is to not spend everything earned in years when investment markets are good. When investment returns are strong, amounts in excess of the spending allocation are reinvested. This enables both protection against inflation, and the buildup of a reserve that can support spending allocations when investment returns are poor.

Decisions on how much should be saved and how much should be allocated to the purpose of the endowment are based on the performance of the university’s overall investment portfolio and the value of the principal. The endowment spending policy established by the university Board of Governors guides these decisions.

Typically, 2.8% - 4% of the value of an endowed fund is allocated to the purpose of the gift. The remainder is left in the endowment for growth, to compensate for inflation, and to cover administrative costs.

Administrative Costs

Fees cover the costs of the infrastructure, people and systems that manage the use of the fund, invest the fund, and fundraise. Currently, 1.1% of the value of the university’s total endowment is directed to fees and expenses

Q & A

How do I decide between making an endowed gift and an expendable gift?

Determine if you would like your gift to have an immediate impact (expendable), or if you would like to leave a legacy that has an impact in perpetuity (endowed).

You should also determine if you would like a guaranteed amount to be allocated to your purpose every year (through an annual expendable gift) or if you are comfortable with an amount that will vary based on investment market conditions (an endowed gift)

Can the amount used from the endowment change from year to year?

Yes. You can add any amount to an endowment at any time. Please contact the Office of Advancement to learn more about how you can support an endowment’s purpose.

How much goes to fees and expenses?

Currently, 0.6 per cent of the value of the endowment is directed to the infrastructure, people and systems that indirectly support its intended purpose, as well as to programs that raise funds for endowments. Another 0.5 per cent is directed to the cost of investment management professionals and other investment management costs.

What do you do with unspent endowment allocations?

Reviews of spending balances are undertaken annually by the managing unit to determine and implement the most appropriate plan to use any unspent funding from prior years. This may result in spending increases immediately (the next year) or over a 2 to 3 year period of time.

Is it possible that nothing would be awarded from my endowment?

Yes. The university may not be able to meet the terms for spending an amount from an endowment. For example, there may be no applications for funding from an endowment that supports students, or no qualified candidates for a new faculty position

If I fund an endowment over time, when will earnings first be spent?

Generally, earnings from an endowment are spent starting the first fiscal year (which begins April 1) after the total value of the endowment reaches $25,000

How has the university’s endowment performed over time?

Since inception of the unitized endowment pool in 1989, the actual annualized investment return has been 9.6%, which is well above the long term investment target of 7.25%. During this same time period, the spending allocation, inflation, fees and expenses amounted to 7.1%. Prudent spending levels combined with strong investment returns have enabled. The endowment to substantially recover from the impacts of the 2008-09 financial crisis.

What policies govern how the university’s endowment investments are managed?

The university manages these funds in accordance with the University Funds Investment Policy, a copy of which can be found at:

The Board Investment Committee sets spending allocation amounts conservatively, with the typical range being 2.8 – 4 per cent of the current value of the endowment. Actual endowment spending in 2015-2016 was 3.0%, which totaled $36-million. The Board Investment Committee’s annual report can be found at: http://www.financial.ualberta.ca/en/InvestmentReports.aspx Details of the calculations used to manage the constant fluctuations in investment markets and rates of inflation can be found in the university’s Unitized Endowment Pool (UEP) Spending Policy, which can be found at: