Endowment Activity Report (July 1, 2010–June 30, 2011)
An investment in an endowment that supports the University of Northern Colorado is an investment in the future of this unique and very deserving institution. Each endowed fund not only provides critical support for today's students, faculty and programs; it builds an economic foundation designed to elevate the mission of the University for generations to come..
Over the course the last fiscal year, the Foundation Board of Directors, in tandem with its Investment Committee, engaged in a series of discussions and analysis regarding spending and fee policies associated with the UNC Foundation's endowed assets. The goal was to establish a spending policy for the pooled endowments and quasi-endowments which not only provides a stable flow of funds to the University in the short term, but maintains purchasing power and intergenerational equity in the long term.
To this end, we are pleased to report the Board of Directors voted to reduce the Foundation's endowment management fees. Beginning fiscal year FY11-12, fees for each endowed fund valued at $1 million or above will be reduced from two percent to 1.25 percent annually. For endowed funds valued at under $1 million and all quasiendowed funds, fees have been reduced from two percent to 1.75 percent annually.
Over the course of the next 20 years, this reduction in annual endowment management fees is projected to yield approximately $2.4 million in increased support to UNC and an increase to the total value of the endowed funds of approximately $8 million.
Enclosed you will find a FY2010-11 financial summary for your endowment. Information included reflects activity for the fiscal year that ended June 30, 2011. Should you have questions or concerns regarding the report or the revised fee policy, please feel free to contact 800.568.5213 or cynthia.evans@unco.edu.
Please accept our sincerest thanks for the confidence you have placed in us by establishing or contributing to an endowed or quasiendowed fund. At the UNC Foundation, we strive to steward your contributions in a manner that matches your generosity.
Maximizing Every Dollar Toward Its Purpose
The Foundation's Investment Committee works diligently to practice superior stewardship of the gifts committed to the University. Studies have shown balanced, well -diversified asset allocations consistently perform better over time under varying market conditions. The Investment Committee has structured the Foundation's pooled portfolio based in this model.
The UNC Foundation currently manages more than 450 endowed and quasi-endowed funds. Each of these funds is invested proportionately in a long term investment pool valued at nearly $88.7 million. With an institutional goal of maximizing every dollar toward its purpose, these funds are invested in a highly diversified portfolio with a long term strategy designed to provide a perpetual, predictable funding stream for the University.
Target allocations and investment managers are reviewed at least quarterly to ensure objectives are being met and assets are rebalanced as needed to align them with the target ranges (+/-3 percent) for each asset class.
Pooled Trust
The Foundation comparatively evaluates its investment performance against other like-sized institutional foundations, a custom benchmark index for the entire fund and custom benchmarks for each of its asset classes. Since inception, the pooled trust has returned nearly 8.4 percent, surpassing both the custom benchmark index of 7.1 percent and the custom CPI of 8.0 percent. Over time, the performance of the pooled trust has routinely equaled or exceeded its custom benchmark and substantially recovered the majority of the value lost in the 2008-09 market decline.
New permanently endowed or quasi-endowed funds are invested in the pooled trust on either January 1st or July 1st subsequent to the fund achieving a minimum gift balance as outlined in the donor agreement. Each fund is accounted for separately and retains its identity, but all such funds are co-mingled for investment purposes in a pooled trust in order to ensure prudent and efficient investment management. The pooled trust operates much like a mutual fund; each endowed account held by the UNC Foundation receives allocated interest earnings, realized gain/loss and unrealized gain/loss in accordance with its percentage of the holding in the overall fund.
The cost of operating the pooled trust is paid through an annual management fee as outlined in each donor's gift agreement. For FY10-11, the management fee was two percent for funds with a fair market value greater than the value of the initial gift, and one percent for funds with a fair market value less than the value of the initial gift.
Unless otherwise specified, the Foundation annually distributes earnings to the University for the purpose outlined in the endowment agreement. In FY10-11, the distribution rate was calculated at four percent of a three-year rolling average for funds with a fair market value greater than the value of the original gift and one percent of a three-year rolling average for funds with a fair market value more than five percent less than the value of the initial gift at December 31, 2009.
Endowed accounts with balances below the minimum gift threshold outlined in the donor agreement will not receive allocated investment earnings or be assessed management fees until such time as the balance reaches the minimum threshold.
Dedicated to stewarding dollars in support of UNC
Over the past nine years, the UNC Foundation has transferred more than $60 million in scholarship and program support to the University. Of this, nearly half was funded from endowed and quasi endowed distributions. The spending policy set by the Foundation Board of Directors is designed to help average the effects of year-to-year variations in market performance by establishing a reasonable, dependable payout rate in current support while preserving and enhancing the principal for future generations.
In FY2010-11, the Foundation transferred more than $4 million in program support and $2.9 million in scholarships to the University. Of this, $3 million was generated from your endowed and quasi-endowed distributions.
