Endowments at Rhode Island College

Endowment funds are gifts from donors with the restriction that the principal not be expended but rather be invested for income-producing purposes. Income from endowments can be either restricted or unrestricted, based on donor direction. A portion of the income is available to be expended for the agreed upon purpose and a portion may be reinvested to maintain purchasing power. Funds designated by the Board to function as endowments may be totally expended at any time at the discretion of the Board.

Approximately 80 percent of the Foundation's assets are held in endowment. These endowment funds are held in perpetuity to support scholarships and programs of the College, many created in honor of or in memory of families and individuals. Additional funds held by the Foundation are designated to be expended in support of College related priorities and programs.

How to Establish an Endowment

The minimum gift to establish an endowment is $10,000, with payments scheduled over a period of years if wished.

An endowment can be established in many ways, such as in your own name or that of family members or your family business, or in honor or in memory of someone special to you.

You can specify how the endowment income will be used. The income can be directed to a particular school, department, or program at the college. It can be used to support scholarships, awards, library resources, research equipment, or chairs and professorships, which provide income for salaries and research activities for the college's outstanding faculty.

An endowment can be funded through a variety, or combination, of ways including cash, securities, life insurance, real estate, charitable trusts, antiques or collectibles, gift annuity, will bequest, or pooled income fund.

Investment Portfolio Management

The Foundation's portfolio is managed by three outside managers, Commonfund, Merrill Lynch, and Washington Trust, who operate within the guidelines established by the Investment Committee of the Board of Directors. The Investment Committee allocates assets among the managers, who have complete discretion to manage their portfolios to achieve the objectives and requirements set forth by the Foundation's Investment Policy and Guidelines.

The Investment Committee conducts manager searches and also appoints a lead investment manager who supervises overall compliance with the Investment Policy and Guidelines and compiles overall portfolio performance. The Investment Committee itself is ultimately responsible for ensuring compliance to the Investment Policy and Guidelines and reporting portfolio performance to the Board of Directors.

Spending Policy

The Foundation has approved a four percent annual distribution based on a three year-rolling average fair market value. Spending for new endowments will be deferred until the accumulated income is equal to an expendable reserve of eighteen months. The annual distribution may not exceed total return for each endowment. Exceptions are possible with board approval.

This policy is based upon the Foundation's goal that the investments earn a minimum annual return of seven percent. The Foundation expects the current spending policy to allow its endowment to grow at an average of three percent annually. This policy is consistent with the Foundation's objective of maintaining the purchasing power of the endowment assets held in perpetuity or for a specified term as well as providing additional real growth through new gifts and investment return.

Investment Strategy

The investment strategy for the portfolio is growth and income. This strategy is consonant with a goal of long-term appreciation and modest income. The Foundation has adopted an asset allocation range that will allow portfolio managers to take a long-term approach to the asset allocation decision rather than a short-term market timing strategy.

Asset Allocation Policy

Endowment assets are invested in a combination of cash equivalents, common stocks, fixed income securities and mutual funds. The equity portfolio is invested in broadly diversified large capitalization (cap) companies with a smaller percentage in mid to small cap companies. Fixed income securities have an overall dollar weighted average "A" quality rating. A small portion of the portfolio is invested in global and international mutual funds as a means of achieving greater equity diversification.

Page last updated: February 15, 2013