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Endowment Fund

An endowment fund is a is an investment fund, typically held by a non-profit organization. The funds are typically funded entirely by donations that are deductible for the donors.

Endowment fund means is an investment made by or on the behalf of a foundation that uses the earnings from the investment to fund its operations.

  • An endowment helps diversify your organization’s income and reduces your vulnerability to every economic crisis.
  • Ensure the long-term growth of the financial asset, which in turn helps to expand on the achievement of the non-profit organization’s overall mission.
  • Endowment funds impress donors, especially generous donors. They know that your nonprofit manages its resources well, plans efficiently, and will likely survive any crisis. Donors also love the option of giving a gift that keeps on giving well into the future, and the opportunity to support the needs of the moment such as operating and program funding.
  • Creates an ongoing source of income - An endowment is a fund that holds its principal in perpetuity and only pays out a small portion, about 4 to 5 percent per year, that goes to operations.
  • Enhances stability and prestige. A well-managed endowment sends a message of planned long-term stability, fiscal responsibility, and financial viability. It enhances the organization’s prestige and credibility.
  • Provides independence. Endowment contributions designated for specific purposes can provide a measure of independence from economic, governmental, and political forces.

The capital in endowment funds, often used by:

  • Universities
  • Nonprofit organizations
  • Churches
  • Hospitals
  • Scholarship funds

An endowment is a fund that is restricted. Only the interest from the fund can be spent, not the principal that anchors the endowment. Usually, only a portion of the interest or earnings from the endowment (typically five percent) can be spent annually to make sure that the original funds grow over time..

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