You spend time and energy monitoring your investment and maximizing your returns. You’re probably even working with a number of investment managers and brokerage firms. And if you’re like most university foundations, you likely have an enormous Excel spreadsheet to track your endowed funds. How can you be sure you’re properly distributing earned income to the right funds? And how can you spend less time throughout the entire process? This presentation was delivered as a live webinar on February 25, 2014. If you'd like me to deliver this presentation, or any of my other presentations, to your group, contact me by email at Jeffrey.Sobers@blackbaud.com or on Twitter at @jeffsobers.

1. Endowment Management
Distribution Basics
Jeff Sobers
Senior Product Marketing Manager

3. Introduction to Endowments
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4. Pop Quiz, Hot Shot
Please Answer True or False
• A university or other charity cannot spend from an
endowment fund that is “underwater” (i.e. with a
value below the value of the original gift(s))
• UMIFA was created to protect money in endowment
funds; UPMIFA allows charities to spend whatever
they want
• UPMIFA changes donor intent
• These statutes apply only when a university and
donor have not reached some other agreement about
the “rules” that will govern endowment spending
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5. Common Endowment Myths
• The university can only spend interest and
dividends
• Any capital gains (net of losses) must be
maintained so that the endowment keeps pace
with inflation
• The money the donor gave, plus the capital
gains, is restricted in perpetuity – the university
can never spend it
• The interest and dividends that the university can
spend may be spent for any purpose within the
tax-exempt mission of the university
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6. Goals of the Endowment
•Create an ongoing source of income
•Enhance stability and prestige
•Relieve pressure on the annual fund
•Allow for program expansion
•Provide independence
•Offer flexibility for management
•Build pipeline of future gifts
•Encourage outright gifts
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7. Benefits to the Donor
•Perpetuate the donor’s values and priorities
•Create a sense of immortality
•Make significant investment in the future
•Endow annual gifts
•Provide incremental funding
•Provide lifetime income
•Alleviate management burden
•Add-as-you-go
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8. The Endowment Process
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9. The Endowment Process
Create
Spend
Fund
Endowed
Fund
Invest
Distribute
Earn

10. Asset Allocation of Endowments
Level One
• Stocks
• Bonds
• Mutual Funds
• Interest-bearing Accounts
Level Two
• Commodities
Level Three
• Private equity
• Venture capital
• Limited partnerships
• Hedge funds
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11. Revenue Generated
•Interest
•Dividends
•Royalties
•Realized Gains
•Unrealized Gains
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12. Income Distribution Methods
•Proportional
•Unitized

13. Proportional Distribution Example
$5,000 investment earnings
Earnings
Endowment Balance
D;
10,000;
10%
C; 38,250;
38%
A; 22,500;
23%
B; 29,250;
29%
D
$500.00
10%
C;
$1,912.50;
38%
A;
$1,125.00;
23%
B;
$1,475.00;
29%

14. Using Excel?

15. Other Considerations?
•Investment Fees
•Where is the Income Going?

16. Scenario
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17. Balances
9300: $11,104,879.22
9301: $1,609,466.86
9302: $2,629,287.44
Balance held in short-term and
long-term investment accounts

18. Income
Interest:
Dividends:
Realized Gains:
Unrealized Gains
$10,000
$20,000
$50,000
$150,000
TOTAL INCOME
$230,000

19. Fees
Investment Manager
• Fee varies based on ending balance
of assets invested
• At the current endowment balance,
0.027% of invested amount is
charged as the investment fee

20. Donor Intent
9300
Earnings are unrestricted
9301
Earnings are used to provide scholarship for gifted
students
9302
Earnings are used to fund overseas scholars program

21. Demonstration
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22. Speaker Follow-up Slide
Jeffrey.Sobers@Blackbaud
843.654.3088 (optional)
@jeffsobers
For more information, resources,
and conversations, visit:
blackbaud.com/research
npEngage.com
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23. Save the Date!
October 6 – 8, 2014, Gaylord Nashville, TN

24. About Blackbaud, Inc.
Serving the nonprofit and education sectors for 30 years, Blackbaud (NASDAQ:
BLKB) combines technology and expertise to help organizations achieve their
missions. Blackbaud works with more than 28,000 customers in over 60
countries that support higher education, healthcare, human services, arts and
culture, faith, the environment, independent K-12 education, animal welfare,
and other charitable causes. The company offers a full spectrum of cloudbased and on-premise software solutions and related services for organizations
of all sizes including: fundraising, eMarketing, social media, advocacy,
constituent relationship management (CRM), analytics, financial management,
and vertical-specific solutions. Using Blackbaud technology, these
organizations raise more than $100 billion each year. Recognized as a top
company by Forbes, InformationWeek, and Software Magazine and honored by
Best Places to Work, Blackbaud is headquartered in Charleston, South
Carolina, and has operations in the United States, Australia, Canada, Mexico,
the Netherlands, and the United Kingdom.
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