Endowment Basics

What is the endowment?

Endowment is a term applied to a collection of individual funds pooled together for investment purposes to provide annual financial support for all that the college does--teaching, research, financial aid, building and grounds maintenance, and programs of all sorts. Donors created the endowment, starting with Matthew Vassar, who established the first endowment at the college's founding. Approximately 1,000 individual endowed funds have been generously donated over the college's 150-year history, and new funds are contributed each year. While these funds are pooled for investment purposes, each fund is also tracked separately so that donors can know what the funds they established are supporting. The investment pool also includes capital gifts that the Board of Trustees has designated to provide permanent support for college programs.

Endowment funds are invested by the college in such a way that they can provide for annual spending and also sustain value over time, to benefit future generations at Vassar as they do today. The endowment is not a "rainy day" fund; rather, each year the college includes in its budget an amount from the endowment to provide additional financial support at a sustainable level. Today, the endowment provides about 32% of the college's operating income.

Information regarding the market value of the endowment at the end of each fiscal year is provided in Vassar's Fact Book (http://institutionalresearch.vassar.edu/factbook_2010/FB10-Part-XII-Finance.pdf). Vassar's endowment was the 8th largest in our 21-college peer group at the end of fiscal year 2011, a position that has remained fairly constant over many years. However, on a per-student basis Vassar's endowment is only the 10th largest, the result of Vassar's larger student body. Per-student endowment is seen as a better measure of institutional strength than absolute endowment size because it better reflects the extent to which the endowment helps to underwrite the academic and other programs provided to students. In the simplest terms, restricted endowment funds are given by donors for a particular purpose (such as financial aid to students, library book acquisitions, lectureships, or endowed faculty positions) and the money in that fund can only be used to further that purpose. Unrestricted funds are given to the college to further its mission, but the college has the freedom to determine what priorities these funds will support. Of the total endowment, about 68% is in restricted funds, and 32% in unrestricted.

Who manages it?

The Board of Trustees is responsible for the endowment and establishes the policies that govern its management and use, consistent with donor intentions and New York State law.

The Investments Committee of the Board determines how the long-term investment pool that includes endowed funds is invested, by determining asset allocation, considering risk parameters, and appointing professional investment managers. Assistance is provided by internal staff and external investment consultants.

How is it invested?

The investment goal for the endowment is to earn an average annual return sufficient to support annual appropriations for operations and compensate for the impact of inflation over time -- taken together, a long-term average annual return objective of about 8.5%. The asset allocation for the endowment is designed to achieve this return objective on average over the long run at an appropriate level of risk or volatility of returns. One of the primary goals of allocating assets across a variety of investment categories is to dampen the volatility of returns, to the extent that is possible in capital markets.

Asset Type Current Target Range

Domestic Equities


9% - 15%

International Equities


10% - 17%

Emerging Markets Equities


3% - 6%

Absolute Return & Long/Short Equity


25% - 35%

Real Assets


15% - 25%

Private Equity/Venture Capital


8% - 12%

Fixed Income


8% - 12%

Multiple investment managers are used within these categories to diversify risk. Each manager is evaluated against a performance benchmark appropriate to the asset class or investment strategy for which the manager was selected.

How has the endowment performed?

The past decade has seen extraordinary volatility in the capital markets in which the endowment is invested, most recently because of the global financial crisis of 2008 and 2009 and earlier because of the "technology bubble" and world political and corporate events.  The result was an average annual compound return of 8.2% for the ten years ended June 30, 2012, compared to a weighted average benchmark based on the asset classes in which the endowment is invested of 7.3%. Compared to returns for a broad universe of college and university endowments, Vassar's 8.2% return ranked in the top 26%. The average annual compound return for the past 20 years was 9.3%, which exceeds the long-term average return sought for the permanent financial assets of the college.

How is the annual appropriation from the endowment determined?

Each year the Board of Trustees determines a level of endowment spending based on a review of factors established under the New York Prudent Management of Institutional Funds Act. In general, Vassar's policies and procedures for determining the appropriation from endowed funds are designed to balance the needs of the college today against the obligation to preserve the purchasing power of the endowment in the future. Although the college has a guideline formula that takes into account inflation and the investment returns achieved in recent years, the aggregate amount appropriated by the Board takes into account the operating needs of the college, expected inflation, the economic environment, and other sources of income available to support operations.

Updated Fall 2012