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 principal of the gift 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 of producing real growth in excess of the endowment spending policy and inflation. The portfolio is broadly diversified into equities, fixed income and alternative investments, including commodities, private equity and hedge funds, with a 75% allocation to equity-oriented investments and 25% to fixed income-oriented investments. The endowment is invested primarily in marketable securities, including: international equities, real estate pools, investment trusts, and other similar investments.
The overriding goal of the Investment Policy is to support OHIO's educational mission and to benefit mankind through commercial development of discoveries created through Ohio University related research.
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 5.8% spending rate and the endowment's average market value for the trailing 36 months. The 5.8% spending rate is composed of a 4% spending allocation and a 1.8% 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.
The spending allocation and administrative fee rates apply to accounts whose market value exceeds the historic gift value. 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 spending rate for underwater endowments is 1%. Underwater endowments are not assessed an administrative fee. This reduced spending rate is designed to speed the endowment's recovery and ensure the account's ability to provide a perpetual income stream in support of the University.