Funds Management Glossary
A gift of real or personal property made at death by a will or a trust.
A fund established by a gift that is meant to provide lasting support to the University whereby the gift itself is permanently invested in the University’s endowment and only the income is available for spending. Endowment funds may be for a restricted purpose (e.g. student financial aid) or for the unrestricted use of the University. In some instances the donor may allow the principal of a gift to the University’s endowment to be spent at some future date or when a specific event has occurred. Such funds are term endowment funds.
Fund Functioning as Endowment (FFE)
A fund established by a gift or other University resources that is treated as an endowment fund even though there is no restriction that precludes the University from spending the principal of the fund. The designation of a fund as a FFE reflects an institution’s own decision to restrict spendability of a fund held by it for its own benefit. FFE’s can only be established, added to, or decapitalized at the direction of the University’s Provost.
Historic Book Value
The original value of a gift at the time it is given.
The actual value of the endowment pools’ investment portfolio at a specific point in time. This value is updated monthly.
Plant Funds (EXPPC)
Plant funds are created primarily to provide support for capital projects related to building renovations, major equipment acquisitions, and other improvements to University owned land or facilities.
Increase or decrease in the current market value of an endowment as a result of the sale of assets held by the endowment.
The University’s Spending Policy attempts to balance the objectives of preserving purchasing power and providing substantial current support by using a long-term target payout rate of 5.25% combined with a smoothing rule that adjusts spending gradually for changes in the market value of Yale’s endowment. The payout under the spending rule is equal to 80% of the prior year’s spending plus 20% of the long-term spending rate applied to the previous year’s beginning endowment market value, with the sum adjusted for inflation. The payout formula also has a floor and a ceiling intended to bring spending to at least 5% per year. The policy is reviewed annually.
Stewardship involves the appropriate acknowledgement of a gift, ensuring that gifts are used in accordance with donor’s wishes, and reporting to donors and/or other parties when either required or when appropriate to do so.
A fund established with a gift whereby the donor specifies that it be invested in the University’s endowment for a certain period of time or until a specific event has occurred. Like a true endowment fund, the income generated by the gift may be spent. However, unlike a true endowment, the principal may be spent, but not unless or until the conditions under which the donor has specified that it may be spent have been met.
A fund whose market value is less than its historic book value.
Increase or decrease in the current market value of an endowment that would be realized if the investments held by that endowment were sold.
Uniform Prudent Management of Institutional Funds Act (UPMIFA)
On October 1, 2007, The Uniform Prudent Management of Institutional Funds Act (“UPMIFA”) became a Connecticut Law, replacing the 1972 Uniform Management of Institutional Funds Act (UMIFA) which created the first prudent investor rule in statutory law. Under the old UMIFA, endowment funds could not be spent below the “historic book value“(HBV) of the original gift. UPMIFA eliminates the concept of HBV, allowing institutions to make distributions from funds of the value which has fallen below their value at the time the fund was created.