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In June 1990, the market value of the University’s endowment was $362 million, according to Vice President and University Treasurer Stephen M. Grimble. As of June 2001, the value had increased to $919 million.
The endowment is important to the well-being of the institution by providing a stable investment pool from which to draw funds that support excellence through scholarships, professorships and improved educational facilities and opportunities. Cumulative income distributions from the endowment over the past decade totaled $230 million, Grimble says.
Through the years, it has been widely joked that the University of Delaware endowment was stored in the basement of Hullihen Hall, the chief administrative office building.
In fact, the endowment is held in professionally managed liquid assets—stocks and
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“The endowment is a trust,” University President David P. Roselle says. “The money was given to the institution to be forever. We must maintain that trust with our donors.”
The University endowment is not one lump sum but rather many smaller sums. Those sums are invested as a whole, with the ensuing profits used to fund the various individual purposes.
“It is kind of like a bank, with lots of accounts within the bank,” Roselle says. “The money is pooled and invested and paid out according to what the share has earned.”
And, in the case of this bank, the accounts are similar to escrow accounts in that much of the money is earmarked for specific purposes. The University cannot spend income from the endowment fund at will because most of the funds are contributed for specific purposes and their uses are thus restricted.
Some donors have chosen to establish endowments to fund scholarships, so the University can attract the best and brightest students from across the nation. Others have chosen to fund named professorships and chairs, ensuring that the University can attract and retain the finest educators and researchers.
It is the University’s duty and obligation to spend the money for the purpose stated by the donor. Money given to establish a scholarship in the College of Arts and Science, for instance, cannot be used by the University to fund beautification or facilities construction or even to fund a scholarship in another college.
Some donors have created unrestricted endowments, the income from which the University can use to meet immediate needs or respond to innovations in higher education.
The endowment fund base is created through gifts from alumni and friends and, as such, represents a special bond between donors and the University. “The alumni and friends of the institution give of their wealth for the health of the institution,” Roselle says.
The base grows both through additional gifts and through gains in the money markets.
As a practical matter, the endowment is of value to the institution first and foremost for the money earned through investments. “Annual income—that is the obvious answer,” Roselle says. “The endowment is an important source of revenue for the institution. Next year, the endowment will pay out nearly $40 million, which is up from $20 million just a few years ago. It is an important part of what we do.”
The University endowment is of additional value in the financial marketplace, through which the institution must from time to time borrow money to fund construction or other projects. “Our endowment is very significant in terms of securing better bond ratings, and thus lower interest rates,” says Steve Grimble, University Treasurer.
UD’s endowment grew at about 12 percent per year during the last decade, a rate of appreciation that has been well above inflation.
The figures are solid, Roselle says, particularly in light of the fact that “the increase is on top of an annual distribution.”
The investment of the University endowment in stocks and bonds is overseen by Grimble, University Chief Investment Officer Mark Stalnecker and Edward J. Bassett, vice president of pension fund investments for the DuPont Co., who heads UD’s Investment Visiting Committee of financial advisers and businessmen.
The Board of Trustees has delegated to the Investment Visiting Committee the authority to oversee and manage the investments of the endowment.
Roselle says the endowment represents about 6 percent of the University’s income, a figure that is much higher than for many other colleges and universities, particularly among state institutions.
The net endowment “draw” has fluctuated over the course of the decade, Roselle says. The “draw” is “the amount of support provided the University from the endowment, minus the amount that is contributed to the endowment by way of gifts. Thus, for example, in FY2000, the endowment paid $30.5 million to the University and our friends contributed $20 million, so the net endowment draw for FY 2000 was $10.5 million.”
“We hear commentary to the effect that the endowment draw has increased a lot,” Roselle says. “While that is true, it is also true that our successes in having money contributed to the endowment have more than offset those increases. It is impressive, I think, that the combined net draw for FY99 and FY2000 is about equal to the net draw for FY98 and that the net draw for FY2000 is less than for FY90.”
The University encourages endowment giving, Roselle says, because “it is a way for our friends to ensure that a favorite activity or program continues indefinitely.”
Gifts of $10,000 or more that are not designated for a specific purpose go to endowment. “That has been a Delaware tradition for a very long time,” Roselle says, adding, “That helps keep the endowment growing.
“Success succeeds,” Roselle says. “The more successful you are, the more people will want to be part of what you do.”
January 2002