Boston University Endowment

Balancing the needs of today with a vision of the future is a challenge, but one that is part and parcel of creating an educated population. The founders of Boston University could not have imagined that what began as a small Methodist seminary in 1839 would grow to the institution we know today with more than 30,000 students from all of the United States and 135 countries.

Student life experiences range from the academic challenges of the classroom to learning to live among a diverse population who are intent on exploring the world around them locally and globally. A healthy endowment adds to the riches that are already available to the students and faculty of Boston University.

What is the endowment?

A university’s endowment is its “trust fund,” it is the nest egg for the future. The endowment is the income-generating body of investments that is maintained in perpetuity and underwrites the institution’s operations.

The endowment is typically divided into two parts. One part is restricted for specific purposes and the other part is unrestricted for general university use. Donors may request that their gifts be designated to either or both of these endowment entities. By making these gifts, donors have an enduring visible imprint on the future of Boston University. Unlike the lifespan of an individual, a university spans countless generations and hundreds of years, and provisions for students, faculty, and facilities are a part of the planning process.

  • The restricted portion of Boston University’s endowment is referred to as the pooled endowment. Donors to the “pool,” designate their gifts for specific purposes such as scholarships, lectureships, professorships or special programs. The pooled endowment is made up of individual funds, each of which is assigned unit shares within the pool. The unit shares determine the annual market value and the annual disbursement. A pooled endowment fund operates very much like a mutual fund but has the advantage of an almost limitless timeframe.
  • Gifts to the unrestricted endowment are used for general purposes of the university and are typically given by donors who prefer to have the university determine the highest and best use for their gifts. These gifts provide the most flexibility and can be used to meet immediate or future needs.

The investment committee of the Board of Trustees manages the endowment. Investments are conservative and diversified and include domestic and international equities as well as fixed-income investments. The managers balance the need for immediate revenue with the necessity of preserving assets for the future.

Why is the endowment critical?

While Boston University relies heavily on current sources of income to take care of immediate needs, the endowment is critical to its long-term success. It is the foundation that keeps the University working today, while assuring support in the years to come.

The Endowment

  • Gives the University flexibility and freedom to embark on new disciplines, to hire additional faculty, and to build new facilities and update existing ones
  • Ensures regular funding levels for University departments and programs
  • Helps stem rises in tuition by supporting University operations that are otherwise paid for with student tuition and grants

A Good Investment

The “Endowment vs. Fixed Income Yield” chart shows the greater benefit to students from a gift of $100,000 to a scholarship fund in the pooled endowment versus the same gift placed in a fixed percentage instrument. Over a period of only twelve years, the investment in the pooled endowment fund yielded $83,540. Had it been placed in a 5% certificate of deposit or a bond with a similar yield, it would have provided only $60,000. The pooled endowment yielded 39% more income for disbursement than the fixed instrument.

Endowment vs. Fixed Income Yield

The pooled endowment yield rises with its market value. Over time, the pooled endowment yielded $23,540.64 more than the fixed yield instrument – a 39.23% advantage.

Fiscal Year
$100,000 Endowment Yield
$100,000 5% Fixed Instrument Yield
FY’89
3,416.16*
5,000.00
FY’90
4,347.84
5,000.00
FY’91
4,968.96
5,000.00
FY’92
4,968.96
5,000.00
FY’93
5,590.08
5,000.00
FY’94
6,211.20
5,000.00
FY’95
7,142.88
5,000.00
FY’96
7,142.88
5,000.00
FY’97
8,074.56
5,000.00
FY’98
9,316.80
5,000.00
FY’99
10,559.04
5,000.00
FY’00
11,801.28
5,000.00
TOTALS
$83,540.64
$60,000.00

*A gift to the pooled endowment begins to generate income in the first full quarter following receipt of the gift. In the first year the endowment generated income for three of four fiscal quarters.