Endowment Funds at Duke:
Frequently Asked Questions
- Q: What is an endowment fund?
A: An endowment fund is a permanent, self-sustaining source of funding. Endowment assets are invested. Each year, a portion of the value of the fund is paid out to support the fund's purpose, and any earnings in excess of this distribution are used to build the fund's market value. In this way, an endowment fund can grow and provide support for its designated purpose in perpetuity. When you establish an endowment fund, you create a permanent legacy of support for Duke. - Q: How much money does it take to start an endowment?
A: The Duke Board of Trustees has set different minimum funding levels for different types of endowments:- $50,000 will establish an unrestricted endowment for a particular school or division, such as the Pratt School of Engineering or the University Libraries.
- $100,000 will establish an endowment restricted to a specific purpose, such as faculty support within Arts & Sciences. (Undergraduate alumni who have graduated in the past ten years may establish a restricted endowment with a minimum gift of $50,000.)
Financial Aid:
- $100,000 will establish an unrestricted financial aid endowment, such as a scholarship supporting undergraduates or medical students.
- $250,000 will establish a restricted financial aid endowment, such as a scholarship that gives preference to biology majors or international students or soccer players.
Faculty Chairs:
- $1,000,000 will establish an endowed chair to support an assistant professor or a visiting professor.
- $1,500,000 will establish an endowed chair to support an associate professor.
- $2,500,000 will establish an endowed chair to support a full professor.
- $3,000,000 will establish an endowed chair to support a university professor with appointments in more than one discipline.
- $5,000,000 will establish an endowed chair to support a faculty member holding the distinguished designation of dean.
Athletics
- $1,000,000 will establish an endowment supporting an associate or assistant coach.
- $2,000,000 will establish an endowment supporting a head coach in a sport other than football or basketball.
- $5,000,000 will establish an endowment supporting the head coach of football, men's basketball, or women's basketball.
- $5,000,000 will establish an endowment supporting the athletic director.
- Q: What else does it take?
A: An endowment agreement. This agreement between the donor and the university permanently defines the purpose of the fund. The agreement also outlines Duke's standard procedures for managing endowment funds. - Q: Whose name is on the endowment?
A: You can name an endowment for yourself, your family, your friend, your favorite professor, your company - the choice is yours. Your endowment will be recorded as "The [Name of Your Choice] Endowment Fund." - Q: My lawyer knows about endowments. Can I have him/her prepare my endowment agreement?
A: Duke uses standard language for endowment agreements to ensure consistency in management of the funds. As we work with you to establish the endowment, we will discuss your preferences and suggestions with you. - Q: Do I need to sign an endowment agreement or meet a minimum gift level if I want to give to an existing endowment?
A: No. You can make a gift of any size to an existing endowment fund without signing an endowment agreement. There may be an existing endowment that reflects your interests and to which you can add your support. Also, many donors who have established endowment funds in the past continue making gifts to them over time. The larger a fund is, the more it can do each year. - Q: How do I find out about my endowment after I have made my gift?
A: Once an endowment reaches the minimum funding level and starts generating spendable income, Duke will begin sending you annual reports detailing the value and use of your endowment fund. Financial aid endowment donors learn about their scholarship and fellowship recipients, and professorship donors are updated on news of their chair-holders. When you establish an endowment at Duke, you begin a new relationship with Duke, and the university will write to you—and later to your family—every year with an update on what your gift is making possible. - Q: Can I meet the students who benefit from my scholarship or fellowship?
A: In most cases, yes. Each year, the university hosts a scholarship and fellowship celebration to bring together scholarship and fellowship donors, recipients, and honorees. Duke Athletics also holds a special event for athletic scholarship donors, and some of Duke's schools hold annual scholarship events as well. If you do not have an opportunity to meet your student at a campus event, Duke's Office of Donor Relations can arrange a visit for you during some other time when you are in Durham. - Q: How else does Duke recognize major donors?
A: The James B. Duke Society, named for Duke University's founder, was created to recognize individuals whose cumulative gifts and pledges to all areas of Duke University total $100,000 or more. Members of the James B. Duke Society are invited to campus once a year for a special celebration recognizing their generosity and their close ties to Duke. - Q: What is the mission of Duke's endowment?
A: The mission of Duke University's endowment is to support the university's activities in perpetuity while maintaining intergenerational equity. Over the years, the growth of the endowment has enabled the university to improve financial aid packages, build the faculty, launch programs and research efforts, and support a wide range of important needs. - Q: Who manages Duke's endowment assets?
A: Duke's endowment assets are managed by DUMAC, LLC, a professionally-staffed investment organization controlled by the university. Learn more about DUMAC. - Q: Once an endowment is activated, how much is spent each year?
A: To balance current and future needs, the university employs investment and spending policies designed to provide an appropriate flow of income to the operating budget while preserving the future purchasing power of the endowment assets in perpetuity. The spending rate is approved by the Board of Trustees and is currently set at a rate of 5.5 percent of the average value for the previous three calendar year-ends. In years of particularly high returns, the Board has limited the amount the payout could increase from the year prior; this policy helped smooth the effect of market fluctuations and allowed Duke to build its endowment in anticipation of leaner times. - Q: How is the downturn in the global economy impacting endowment spending?
A: During 2008-09, Duke's endowment, like university endowments across the globe, suffered significant investment losses. Between July 1, 2008, and June 30, 2009, the investment return on the university's endowment pool was negative 24.3 percent. Because endowment spending is based on a trailing three-year average, investment losses in one calendar year impact spending for the next three fiscal years.
In response to endowment and investment declines and a projected slowing of other revenue streams, Duke officials are working to close an estimated $125 million budget shortfall over three years. While not insignificant, this gap is considerably smaller than at some other leading universities that depend more heavily on endowment returns to fund operations. Spending for Duke University's endowment typically covers about 15 percent of its operating budget; many of Duke's peers rely on endowment to cover 30-40 percent of their operating budgets.
In spite of the university's anticipated budget shortfall, Duke's commitment to financial aid has not wavered. The university has actually budgeted for an increase in spending on financial aid for the 2009-10 academic year. For more about the 2009-10 budget, visit http://news.duke.edu/2009/05/budget09.html.
Stewardship and Recognition
Endowment Management
- Q: Exactly how is the spendable income used?
A: The spendable income from each endowment fund is used to support the fund's direct costs, as well as a portion of indirect costs. Distributions from scholarship endowments, for instance, generally fund full or partial scholarship grants and support indirect costs associated with those grants. Distributions from faculty chair endowments generally support the salary and fringe benefits of the chair-holder and other expenses relating to the chair-holder's teaching and research. The size of a particular student's grant or a particular faculty member's salary will be determined by the university, of course. Endowment distributions will be used to help meet the cost.
updated 10/06/09