Ohio University Endowment
Ohio University's endowment is an aggregation of assets invested by the University to support its educational mission, in perpetuity. An endowment allows donors to transfer their private dollars to public purposes with the assurance that their gifts will serve these purposes for as long as the institution continues to exist.
Endowments serve institutions and the public by providing stability over time — the gift corpus is not spent, while endowments generate earnings year after year that can be spent. This spending allocation can enhance financial aid and scholarship packages; encourage research and creative activity; and inspire program innovation. Endowment gifts keep on giving.
The endowment investment portfolio is professionally managed, with the long-term objective to achieve a total return averaging at least the sum of the spending rate, administrative fee and inflation. The portfolio is broadly diversified into traditional and alternative investments, with all positions falling into one of four broad asset categories: global equities, global fixed income, real assets and diversifying strategies.
Endowed gifts are invested permanently and accumulate investment income over time. Annually, a small portion of the endowment market value is authorized for expenditure in accordance with the spending policy adopted by The Ohio University Foundation. The spending policy and spending rate are reviewed annually and adjusted, as necessary, with the primary objective of balancing the need for current spending with the goal of supporting future expenditures into perpetuity. Endowment distributions are sourced from accumulated investment income — not the gift itself. Any undistributed investment income is retained with the endowment principal to provide a hedge against inflation, to generate additional growth, and to provide for protection during years with unfavorable or negative investment returns.
Currently, the annual endowment distribution is equal to the product of a 5.7% spending rate and the endowment's average market value for the trailing 36 months. The 5.7% spending rate is composed of a 4% spending allocation and a 1.7% administrative fee. The spending allocation supports various initiatives, as specified in the gift agreement. This includes, but is not limited to, scholarships and fellowships, chairs and professorships, research activities, and general support of academic units. The administrative fee provides general support for the institution's fundraising, alumni relations, and fund administration functions.
Occasionally, due to a downturn in the investment market, an account's market value may temporarily fall below its historic gift value. When this occurs, the endowed account is "underwater." The policy spending allocation and administrative fee rates described above apply to accounts whose market value is at least 90% of the historic gift value. Underwater endowments with a market value of at least 80% but less than 90% of the historic gift value distribute a 3% spending allocation and are subject to a 1.0% administrative assessment. Underwater endowments with a market value of less than 80% of the historic gift value distribute a 1% spending allocation and are not subject to an administrative assessment. These reduced spending rates are designed to speed the endowment's recovery and ensure the account's ability to provide a perpetual income stream in support of the University.