What is an endowment fund?

An endowment fund is an investment portfolio held by a nonprofit organization—such as a university, hospital, or museum—for the purpose of generating a permanent stream of capital. The fund’s portfolio can be made up of cash, publicly traded securities, real estate, life insurance, retirement accounts, and other assets.

How does a non-profit fund work?

The funds have specific policies concerning investments, withdrawal as well as usage of the funds. Normally the policies allow that the initial investment, known as the principal, shall remain untouched, and only the investment income can be withdrawn for use in the operations of the non-profit organization.

What is a quasi-endowment fund?

Quasi-Endowment The typical type of endowment fund is permanent funds, which are established to exist in perpetuity. In contrast, a quasi-endowment fund is not required by any legal restriction to exist permanently, which means the principal of a quasi-endowment is allowed to be spent at some point.

What is a fund agreement?

The fund agreement is a signed document—typically created by the donor—that clearly states how the organization can spend the fund’s budget. The organization can’t use the fund for any other purpose unless the donor makes an amended agreement. The spending policy outlines how much of an endowment’s investment returns can be spent each year.