Stewardship

Endowments are created by blending a donor's vision with Penn State's goals and objectives. While endowments strengthen the University now, their premise is to plan for and strengthen Penn State's future. Endowed gifts are held by Penn State in perpetuity. The initial gift is invested, and a portion of the average annual investment return is spent for the purpose designated by the donor. The remaining income is added to the principal as protection against inflation. Thus an endowed gift today will have relatively the same value for future generations.

The Long-Term Investment Pool is Penn State's endowment portfolio into which endowed funds established at the University are invested. This commingled pool operates much like a mutual fund. Each endowment owns a number of units in the pool, just as an individual would purchase shares in a mutual fund. And as with a mutual fund, the value of each unit at the time funds are invested in the pool determines how many units an individual fund acquires.

Penn State strives to be a good steward of its endowed gifts and follows a prudent management philosophy in investing these gifts so that they maintain their value in real terms over time. The University's Board of Trustees has established four basic endowment management principles to guide the University's Investment Council:

1. Provide sufficient current and future income to meet the University's spending objectives and enhance its mission.
2. Focus on long-term performance.
3. Accept a reasonable and prudent level of risk while maximizing "total" return.
4. Diversify investments to reduce risk.

These four principles ensure that the spending power of each endowment gift will be maintained in the face of economic fluctuations.

Gifts to Endowment (Year Ending June 30)