What are the different types of endowment funds?

Endowment funds are established to fund nonprofit organizations and activities, including universities, hospitals, and charities. They are typically structured with intact principals and investment income available for use. Term endowment, restricted and unrestricted endowment, and quasi-endowment funds are some types of endowment funds.

How does a foundation fund its endowment?

The foundation’s endowment is invested, and the foundation is required to pay out at least 5% of the value of its assets in the form of grants and operating expenses each year. Public charities, or what you think of when you think “nonprofits,” can also have endowment funds. These are funded by dedicated endowment gifts from donors.

Who is a beneficiary of an endowment fund?

Unlike a typical investment fund, the beneficiary of an endowment fund is a nonprofit organization instead of individual investors. The principal value of the endowment fund is kept intact, while the investment earnings can be distributable dollars used for charitable grants to nonprofits.

What is a 'endowment fund invasion'?

Drawing down the corpus of the endowment to pay debts or operating expenses is known as “invading” or “endowment fund invasion,” and sometimes requires court approval.