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A financial endowment is a legal structure for managing, and in many cases indefinitely perpetuating, a pool of
financial Finance is the study of financial institutions, financial markets and how they operate within the financial system. It is concerned with the creation and management of money Image:National-Debt-Gillray.jpeg, In a 1786 James Gillray caricatu ...
,
real estate Real estate is property consisting of land and the buildings on it, along with its natural resource , Malaysia Malaysia ( ; ) is a country in Southeast Asia. The federation, federal constitutional monarchy consists of States and feder ...

real estate
, or other investments for a specific purpose according to the will of its founders and donors. Endowments are often structured so that the
principal Principal may refer to: Title or rank * Principal (academia) The principal is the chief executive and the chief academic officer of a university A university ( la, universitas, 'a whole') is an educational institution, institution of higher ...
value is kept intact, while the
investment income To invest is to allocate money Image:National-Debt-Gillray.jpeg, In a 1786 James Gillray caricature, the plentiful money bags handed to King George III are contrasted with the beggar whose legs and arms were amputated, in the left corner, 17 ...
or a small part of the principal is available for use each year. Endowments are often governed and managed either as a
nonprofit corporation A nonprofit corporation is any legal entity which has been incorporated under the law of its jurisdiction for purposes other than making profits for its owners or shareholders. Depending on the laws of the jurisdiction, a nonprofit corporation may ...
, a
charitable foundation A foundation (also a charitable foundation) is a category of nonprofit organization A nonprofit organization (NPO), also known as a non-business entity, not-for-profit organization, or nonprofit institution, is a legal entity organized and oper ...
, or a
private foundation A private foundation is a charitable organization that, while serving a good cause, might or might not qualify as a public charity by government standards. The Bill & Melinda Gates Foundation is the largest private foundation in the U.S. with ove ...
that, while serving a good cause, might not qualify as a public charity. In some jurisdictions, it is common for endowed funds to be established as a trust independent of the organizations and the causes the endowment is meant to serve. Institutions that commonly manage endowments include academic institutions (e.g.,
college A college (Latin: ''collegium'') is an educational institution or a University system, constituent part of one. A college may be a academic degree, degree-awarding Tertiary education, tertiary educational institution, a part of a collegiate un ...

college
s,
universities A university () is an educational institution, institution of higher education, higher (or Tertiary education, tertiary) education and research which awards academic degrees in several Discipline (academia), academic disciplines. Universities typi ...
, and
private school Private or privates may refer to: Music * "In Private "In Private" was the third single in a row to be a charting success for United Kingdom, British singer Dusty Springfield, after an absence of nearly two decades from the charts. Both "In Pri ...
s); cultural institutions (e.g., museums, libraries, and theaters); service organizations (e.g., hospitals, retirement homes; the
Red Cross The International Red Cross and Red Crescent Movement is an international humanitarian movement with approximately 97 million volunteers, members and staff worldwide, which was founded to protect human life and health, to ensure respect for al ...
); and religious organizations (e.g., churches, synagogues, mosques). Private endowments are some of the wealthiest entities in the world, notably private higher education endowments. Harvard University's endowment (valued at $53.2 billion ) is the largest academic endowment in the world. The
Bill and Melinda Gates Foundation The Bill & Melinda Gates Foundation (BMGF), a merging of the William H. Gates Foundation and the Gates Learning Foundation, is an American private foundation A private foundation is a charitable organization A charitable organization or cha ...
is one of the wealthiest private foundations as of 2019 with endowment of $46.8 billion .


Types

Most private endowments in the United States are governed by the
Uniform Prudent Management of Institutional Funds ActThe Uniform Prudent Management of Institutional Funds Act (abbreviated UPMIFA) is a uniform act In the United States The United States of America (USA), commonly known as the United States (U.S. or US), or America, is a country Contiguous ...
which is based in part on the concept of
donor intent In philanthropy Philanthropy consists of "private initiatives, for the Public good (economics), public good, focusing on quality of life". Philanthropy contrasts with business initiatives, which are private initiatives for private good, focusing o ...
that helps define what restrictions are imposed on the principal and earnings of the fund. Endowments in the United States are commonly categorized in one of four ways: *Unrestricted endowment can be used in any way the recipient chooses to carry out its mission. *Term endowment funds stipulate that all or part of the principal may be expended only after the expiration of a stated period of time or occurrence of a specified event, depending on donor wishes. *Quasi endowment funds are designated endowments by an organization's governing body rather than by the donor. Therefore both the principal and the income may be accessed at the organization's discretion. Quasi endowment funds are still subject to any other donor restrictions or intent. *Restricted endowments ensure that the original principal is held in perpetuity and that the earnings from this original principal are allocated according to the donor's requirements.


Restrictions and donor intent

Endowment revenue can be restricted by donors to serve many purposes. Endowed professorships or scholarships restricted to a particular subject are common; in some places a donor could fund a trust exclusively for the support of a pet. Ignoring the restriction is called " invading" the endowment. But change of circumstance or financial duress like bankruptcy can preclude carrying out the donor's intent. A court can alter the use of restricted endowment under a doctrine called cy-près meaning to find an alternative "as near as possible" to the donor's intent.


History

The earliest endowed chairs were established by the
Roman Roman or Romans most often refers to: *, the capital city of Italy *, Roman civilization from 8th century BC to 5th century AD *, the people of ancient Rome *', shortened to ''Romans'', a letter in the New Testament of the Christian Bible Roman ...

Roman
emperor An emperor (from la, imperator The Latin word "imperator" derives from the stem of the verb la, imperare, label=none, meaning 'to order, to command'. It was originally employed as a title roughly equivalent to ''commander'' under the Roma ...

emperor
and
Stoic STOIC (Stack-Oriented Interactive Compiler) is a 1970s programming language A programming language is a formal language comprising a Instruction set architecture, set of instructions that produce various kinds of Input/output, output. Progr ...
philosopher A philosopher is someone who practices philosophy Philosophy (from , ) is the study of general and fundamental questions, such as those about Metaphysics, existence, reason, Epistemology, knowledge, Ethics, values, Philosophy of mind, mi ...

philosopher
Marcus Aurelius Marcus Aurelius Antoninus ( ; 26 April 121 – 17 March 180) was a Roman emperor The Roman emperor was the ruler of the Roman Empire during the History of the Roman Empire, imperial period (starting in 27 BC). The emperors used a vari ...

Marcus Aurelius
in
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Athens
in AD 176. Aurelius created one endowed chair for each of the major schools of philosophy:
Platonism Platonism is the philosophy Philosophy (from , ) is the study of general and fundamental questions, such as those about Metaphysics, existence, reason, Epistemology, knowledge, Ethics, values, Philosophy of mind, mind, and Philosophy of ...
,
Aristotelianism Aristotelianism ( ) is a philosophical tradition inspired by the work of Aristotle Aristotle (; grc-gre, Ἀριστοτέλης ''Aristotélēs'', ; 384–322 BC) was a Greek philosopher A philosopher is someone who practices philo ...
,
Stoicism Stoicism is a school of Hellenistic philosophy Hellenistic philosophy is the period of Western philosophy Western philosophy encompasses the philosophical Philosophy (from , ) is the study of general and fundamental questions, s ...
, and
Epicureanism Epicureanism is a system of founded around 307 BC based upon the teachings of the . Epicureanism was originally a challenge to . Later its main opponent became . Few writings by Epicurus have survived. However, there are independent attestat ...
. Later, similar endowments were set up in some other major cities of the Empire. The earliest universities were founded in Europe, Asia and Africa.Rüegg, Walter: "Foreword. The University as a European Institution", in: ''A History of the University in Europe. Vol. 1: Universities in the Middle Ages'', Cambridge University Press, 1992, , pp. XIX–XX.Hunt Janin: "The university in medieval life, 1179–1499", McFarland, 2008, , p. 55f.de Ridder-Symoens, Hilde
''A History of the University in Europe: Volume 1, Universities in the Middle Ages''
Cambridge University Press, 1992, , pp. 47–55
''
Encyclopædia Britannica The (Latin for "British Encyclopaedia") is a general knowledge English-language encyclopaedia which is now published exclusively as an online encyclopedia, online encyclopaedia. It was formerly published by Encyclopædia Britannica, Inc., ...
''
"University"
, 2012, retrieved 26 July 2012)
Their endowment by a prince or monarch and their role in training government officials made early Mediterranean universities similar to Islamic
madrasa Madrasa (, also , ; Arabic Arabic (, ' or , ' or ) is a Semitic language The Semitic languages are a branch of the Afroasiatic language family originating in the Middle East The Middle East is a list of transcontinental cou ...

madrasa
s, although madrasas were generally smaller, and individual teachers, rather than the madrasa itself, granted the license or degree.
Waqf A waqf ( ar, وَقْف; ), also known as hubous () or ''mortmain Mortmain () is the perpetual, inalienable ownership of real estate Real estate is property consisting of land and the buildings on it, along with its natural resources ...

Waqf
( ar, وَقْف; ), also known as 'hubous' (حُبوس) or ''
mortmain Mortmain () is the perpetual, inalienable ownership of real estate Real estate is property consisting of land and the buildings on it, along with its natural resources such as crops, minerals or water; immovable property of this nature; an ...
'' property, is a similar concept from
Islamic law Sharia (; ar, شريعة, sharīʿa ) is a religious law Religious law includes ethical and moral codes taught by religious traditions. Different religious systems hold sacred law in a greater or lesser degree of importance to their beli ...
, which typically involves donating a building, plot of land or other assets for
Muslim Muslims () are people who follow or practice Islam Islam (; ar, اَلْإِسْلَامُ, al-’Islām, "submission o God Oh God may refer to: * An exclamation; similar to "oh no", "oh yes", "oh my", "aw goodness", "ah gosh", ...

Muslim
religious or charitable purposes with no intention of reclaiming the assets. The donated assets may be held by a
charitable trust A charitable trust is an irrevocable trust established for charitable The practice of charity means the Volunteering, voluntary giving of help to those in need, as a Humanitarianism, humanitarian act. There are a number of Philosophy, philosophie ...
. The two oldest known ''waqfiya'' (deed) documents are from the 9th century, while a third one dates from the early 10th century, all three within the Abbasid Period. The oldest dated ''waqfiya'' goes back to 876 CE, concerns a multi-volume Qur'an edition and is held by the Turkish and Islamic Arts Museum in
Istanbul ) , postal_code_type = Postal code A postal code (also known locally in various English-speaking countries throughout the world as a postcode, post code, PIN or ZIP Code) is a series of letters or digits or both, sometimes ...

Istanbul
. A possibly older ''waqfiya'' is a papyrus held by the
Louvre The Louvre ( ), or the Louvre Museum ( ), is the world's most-visited museum, and a historic landmark in Paris Paris () is the Capital city, capital and List of communes in France with over 20,000 inhabitants, most populous city of Fr ...

Louvre
Museum in
Paris Paris () is the Capital city, capital and List of communes in France with over 20,000 inhabitants, most populous city of France, with an estimated population of 2,175,601 residents , in an area of more than . Since the 17th century, Paris ha ...

Paris
, with no written date but considered to be from the mid-9th century. The earliest known waqf in Egypt, founded by financial official Abū Bakr Muḥammad bin Ali al-Madhara'i in 919 (during the Abbasid period), is a pond called Birkat Ḥabash together with its surrounding orchards, whose revenue was to be used to operate a hydraulic complex and feed the poor. In India, wakfs are relatively common among Muslim communities and are regulated by the Central Wakf Council and governed by Wakf Act 1995 (which superseded Wakf Act 1954).


Modern college and university endowments

Academic institutions, such as colleges and universities, will frequently control an endowment fund that finances a portion of the operating or capital requirements of the institution. In addition to a general endowment fund, each university may also control a number of restricted endowments that are intended to fund specific areas within the institution. The most common examples are endowed professorships (also known as named chairs), and endowed
scholarship A scholarship is an award of financial aid Student financial aid in the United States is funding that is available exclusively to students attending a Higher education in the United States, post-secondary educational institution in the Unite ...

scholarship
s or fellowships. The practice of endowing professorships began in the modern in England in 1502, when
Lady Margaret Beaufort Lady Margaret Beaufort (usually pronounced: or ; 31 May 1441/3 – 29 June 1509) was a major figure in the Wars of the Roses of the late fifteenth century. A descendant of King Edward III, Lady Margaret passed a disputed claim to the Engl ...

Lady Margaret Beaufort
, Countess of Richmond and grandmother to the future king
Henry VIII Henry VIII (28 June 149128 January 1547) was King of England This list of kings and queens of the Kingdom of England The Kingdom of England was a sovereign state on the island of Great Britain from 12 July 927, when it emerged fro ...
, created the first endowed chairs in divinity at the universities of Oxford ( Lady Margaret Professor of Divinity) and Cambridge (
Lady Margaret's Professor of Divinity The word ''lady'' is a term of respect for a girl or woman, the equivalent of lord Lord is an appellation for a person or deity who has authority, control, or power (social and political), power over others, acting as a master, a chief, ...
).Lady Margaret's 500-year legacy
– University of Cambridge.
Nearly 50 years later, Henry VIII established the
Regius Professorships A Regius Professor is a university Professor (highest academic rank), professor who has, or originally had, Monarchy of the United Kingdom, royal patronage or appointment. They are a unique feature of academia in the United Kingdom and Republic ...
at both universities, this time in five subjects: divinity, civil law, Hebrew, Greek, and physic—the last of those corresponding to what are now known as medicine and basic sciences. Today, the
University of Glasgow The University of Glasgow (abbreviated as ''Glas.'' in Post-nominal letters, post-nominals; ) is a Public university, public research university in Glasgow, Scotland. Founded by papal bull in 1451, it is the List of oldest universities in continuous ...

University of Glasgow
has fifteen Regius Professorships. Private individuals also adopted the practice of endowing professorships.
Isaac Newton Sir Isaac Newton (25 December 1642 – 20 March 1726/27) was an English mathematician A mathematician is someone who uses an extensive knowledge of mathematics Mathematics (from Greek: ) includes the study of such topics a ...

Isaac Newton
held the Lucasian Chair of Mathematics at Cambridge beginning in 1669, more recently held by the celebrated physicist
Stephen Hawking Stephen William Hawking (8 January 1942 – 14 March 2018) was an English theoretical physics, theoretical physicist, cosmology, cosmologist, and author who, at the time of his death, was director of research at the Centre for Theoretica ...

Stephen Hawking
. In the United States, the endowment is often integral to the financial health of educational institutions. Alumni or friends of institutions sometimes contribute capital to the endowment. The use of endowment funding is strong in the United States and Canada but less commonly found outside of North America, with the exceptions of
Cambridge Cambridge ( ) is a university city and the county town In the United Kingdom The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain,Usage is mixed. The Guardian' and Telegraph' ...
and
Oxford Oxford () is a city in England. It is the county town In the United Kingdom The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain,Usage is mixed. The Guardian' and Telegraph' u ...
universities. Endowment funds have also been created to support secondary and elementary school districts in several states in the United States.


Endowed professorships

An endowed
professor Professor (commonly abbreviated as Prof.) is an academic An academy (Attic Greek: Ἀκαδήμεια; Koine Greek Ἀκαδημία) is an institution of secondary education, secondary or tertiary education, tertiary higher education, hig ...

professor
ship (or endowed chair) is a position permanently paid for with the revenue from an endowment fund specifically set up for that purpose. Typically, the position is designated to be in a certain department. The donor might be allowed to name the position. Endowed professorships aid the university by providing a faculty member who does not have to be paid entirely out of the operating budget, allowing the university to either reduce its student-to-faculty ratio, a statistic used for college rankings and other institutional evaluations, or direct money that would otherwise have been spent on salaries toward other university needs. In addition, holding such a professorship is considered to be an honour in the academic world, and the university can use them to reward its best faculty or to recruit top professors from other institutions.Cornell's "Celebrating Faculty" Website


Endowed scholarships and fellowships

An endowed
scholarship A scholarship is an award of financial aid Student financial aid in the United States is funding that is available exclusively to students attending a Higher education in the United States, post-secondary educational institution in the Unite ...

scholarship
is tuition (and possibly other costs) assistance that is permanently paid for with the revenue of an endowment fund specifically set up for that purpose. It can be either merit-based or need-based (the latter is only awarded to those students for whom the college expense would cause their family financial hardship) depending on university policy or donor preferences. Some universities will facilitate donors' meeting the students they are helping. The amount that must be donated to start an endowed scholarship can vary greatly. Fellowships are similar, although they are most commonly associated with graduate students. In addition to helping with tuition, they may also include a stipend. Fellowships with a stipend may encourage students to work on a
doctorate A doctorate (from Latin Latin (, or , ) is a classical language belonging to the Italic branch of the Indo-European languages. Latin was originally spoken in the area around Rome, known as Latium. Through the power of the Roman Republ ...

doctorate
. Frequently, teaching or working on research is a mandatory part of a fellowship.


Charitable foundations

A foundation (also a charitable foundation) is a category of
nonprofit organization A nonprofit organization (NPO), also known as a non-business entity, not-for-profit organization, or nonprofit institution, is a legal entity organized and operated for a collective, public or social benefit, in contrast with an entity that o ...
or
charitable trust A charitable trust is an irrevocable trust established for charitable The practice of charity means the Volunteering, voluntary giving of help to those in need, as a Humanitarianism, humanitarian act. There are a number of Philosophy, philosophie ...
that will typically provide funding and support for other
charitable organization A charitable organization or charity is an organization whose primary objectives are philanthropy Philanthropy consists of "private initiatives, for the public good, focusing on quality of life Quality of life (QOL) is defined by the Wor ...
s through grants, but may engage directly in charitable activities. Foundations include public charitable foundations, such as
community foundation Community foundations (CFs) are instruments of civil society designed to pool donations into a coordinated investment and grant making facility dedicated primarily to the social improvement of a given place. Community foundations are a global phenom ...
s, and
private foundation A private foundation is a charitable organization that, while serving a good cause, might or might not qualify as a public charity by government standards. The Bill & Melinda Gates Foundation is the largest private foundation in the U.S. with ove ...
s which are typically endowed by an individual or family. The term foundation though may also be used by organizations not involved in public grant-making.


Fiduciary management

A financial endowment is typically overseen by a board of
trustee Trustee (or the holding of a trusteeship) is a legal term {{Short pages monitor