The following is a list of endowment-related terms and definitions.

An investment's earnings from dividend, interest, partnership distributions, rents, royalties and other income related to investment; net of investment related expenses (i.e., management expenses).

Growth in the market value of a fund over time. Calculated as the difference between the market value and the original cost basis. May also refer to the increase in market value during a specific period.

Original cost basis or amount initially invested, plus any new money invested in the fund.

Total donor gifts to a true endowment plus donor-required returns to principal (historical dollar value).

Corpus and Principal are sometimes used interchangeably, but principal also includes nonmandatory reinvestments of unspent payout, and unrealized appreciation/depreciation.

The source of money is either (1) a donor gift, or (2) internal university money. Principal is used to generate payout to support the operations of the fund holder (e.g., university, school, department).  

True Endowment – Endowment created at the request of a donor, using gift monies provided by that donor. These monies are typically used to purchase pure shares in the Merged Pool (MP). Refer to Administrative Guide Policy 3.1.2: University Funds) for more information. Shares in a True Endowment are permanently restricted per accounting rules; however, these funds may also hold some quasi shares from non-mandatory reinvestments of unused payout or other sources.

Term Endowment – Donor gift where the entire principal must be spent over a stated period of time or the occurrence of a specified event, depending on donor wishes. Shares in a term endowment are temporarily restricted per accounting rules, but their use is always restricted per donor terms.

Fund Functioning as Endowment (FFE) – Donor gift OR university monies in an expendable fund that is invested to function in a manner similar to true endowment but is not donor directed to remain in perpetuity. FFE funds contain quasi shares that are unrestricted per accounting rules, but the use of any payout may be unrestricted or restricted per donor terms.

From the cash perspective, this pool holds the prior years’ unspent payout from true endowments but not from FFE.

Refer to Endowment Fund.

Stanford’s working capital investment pool, including:

  • FFE
  • Debt Recycling Pool
  • Insurance and Benefit Program Reserves
  • Student Loan Funds
  • Plant Funds
  • Agency Funds
  • Gifts Pending Designation
  • Restricted Funds
  • Designated Funds
  • Unrestricted Funds

A minimum of approximately $100 million of the EFP is invested in cash vehicles and the remainder is cross-invested in the MP. 

Spendable amount produced by an endowment, which can include payout from shares invested in the MP, EIFP interest, and income from specifically invested assets.

A flag/descriptor that identifies when payout from a fund requires special handling. The most common income exception is when income (i.e., what is held in the spendable ‘SU’ side of the fund) is returned to principal.

From the individual fund holder perspective, funds which hold the payout produced by their investment in the MP. Income funds are accounted for in the SU set of books. Any unused payout for an FFE income fund is invested in the EFP; any unused payout for a pure endowment fund is invested in the EIFP.

Collection of monies which are merged together for investment purposes.  Stanford has 5 investment pools (MP – A, B, D; Pool C – Hoover Institution; Pool T – Stanford Business School Trust).

All MP shares are subject to donor- or university-imposed restrictions regarding the spendability of the principal of the fund. There are three levels of accounting restriction per FAS 117 for MP shares:

  • Permanently restricted (PR)– principal must remain in perpetuity.
  • Temporarily restricted (TR) – principal may not be expended until the passage of time or with the occurrence of an event.
  • Unrestricted (UR) – principal is fully expendable.

The above applies to accounting levels of restriction, but there are also levels of restriction per donor. All funds at the university either come with donor terms (i.e., a gift) or do not (i.e., royalty income or general funds surpluses). Funds with donor terms (regardless of the level of restriction of shares within the fund) may be highly restricted from a purpose viewpoint (i.e., for a grad student in a particular discipline) or unrestricted (for whatever the university or department deems important). 

Current worth of a fund’s investment in the MP calculated as the number of shares held multiplied by the current share value. 

An Oracle Financials concept used to separate different types of financial activity. The following sets of books are used for endowment accounting:

  • SU – Stanford Operations: the university’s primary operational set of books. Contains endowment income funds and is where payout is recorded. 
  • EN – Endowment Principal: holds the endowment principal balances and activity. 

Dollar amount credited to income funds (SU set of books) monthly, based on the number of shares held by each fund at the beginning of the month. Payout not funded by actual earnings comes from appreciation. 
Payout must be spent in accordance with donor wishes for funds created using gifts (as opposed to other sources such as royalty income, patent income, budget surpluses, etc.).

Monies available in a fund to support the non-earnings portion of payout. All funds are eligible to receive actual earnings.

Merged Pool (MP) contains the following pool types:

  • A – shares in true endowment funds where the donor limits payout to actual earnings only (i.e., appreciation may not be spent). These represent a small minority of shares in the MP.
  • B – primary pool type for shares in endowment and non-endowment funds. 
  • D – non-endowment shares in funds set up for Living Trusts and Charitable Remainder Trusts.
  • C – shares in Pool C
  • T – shares in Pool T 

Corpus plus any unused payout that has been reinvested and unrealized appreciation or depreciation. Principal funds hold the investment in the MP and reside in the EN set of books.  

Corpus and Principal are sometimes used interchangeably, but principal also includes nonmandatory reinvestments of unspent payout, and unrealized appreciation/depreciation.

Refer to Share Purity.

Refer to Share Purity.

Pure Shares – permanently restricted shares in true endowments (i.e., principal must remain in perpetuity). Pure Shares are further defined as:

  • Pure Limited – the donor allows earnings and available appreciation to be used to fund payout.
  • Pure Unlimited –the donor additionally allows borrowing from future market value (i.e., drawing Market Value below Book Value) if there is not enough appreciation to fund full payout.  

Quasi Shares – shares invested in the MP per the request of an internal university party, not a donor. These are temporarily restricted or unrestricted shares that characterize term endowments and FFE, but may also be found in true endowments when payout has been voluntarily reinvested to principal, or unrestricted monies have otherwise been added to the fund. This designation is also used for temporarily restricted and unrestricted shares in non-endowment funds. All quasi shares are considered unrestricted per accounting definition.

This is the value of a single share for each pool. The share value for each pool is recalculated each month. Stanford calculates share value at two points in time for each month:

  • Ending Share Value –equal to the pool’s total market value divided by the total number of outstanding shares; used to calculate share value for prior months and to determine payout resources for payout in a current month.
  • Interim Share Value – equal to the Ending Share Value from the prior month, minus payout per share for the current month; used for transactions and to calculate current market value.

University policy that determines the annual flow of funds from the endowment to the operating budget, balancing the need for stable and predictable current spending with the need to preserve endowment principal to support spending into perpetuity through the pursuit of intergenerational equity. Spending policies inform spending rules (e.g., smoothing formula) to establish spending rates.

Spending rate is the percentage of the market value of the endowment that is withdrawn annually as payout to support university expenditures. 
Spending rate also refers to Payout per Share proposed by the Budget Office and approved by the Board of Trustees annually in February.

Refer to Endowment Fund.

Refer to Endowment Fund.

Underwater Fund: Describes a fund where the current market value has declined below book value. A fund is considered partially underwater when it has available payout resources to fund only a portion of payout in a given month.

Payout that remains in principal as additional shares when a fund is not eligible for full payout (because of the nature of the fund, or because it has insufficient payout resources).

Questions?

arrow_upward
Back to Top