Endowments are comprised of 3 major components:
- Funds: gifts/donations to a specific endowment, usually established by a donor for a specific purpose. All gifts (sometimes referred to as corpus) plus investment earnings (gains/losses) equal the total market value of each individually named (endowed) fund.
- Investment Managers: individual investment account “statements” where the individually named funds are invested (clients with the Investment Portfolio Module can track these individual managers within Balance). Examples are a specific equity, mutual fund, cash, or any other single, specific investment.
- Note: If client receives a Master Custodian Statement, then the individual accounts that are listed on that statement could be considered the managers in Balance, if the client wants to track them that way (for those clients with the Investment Portfolio module).
- Investment Pool: all of the individually named funds are co-mingled together and invested amongst the various investment managers. The earnings from all managers are allocated to all funds within the pool.
Scenario 1:
The Fundriver University Investment Pool is comprised of 100 individual named funds that are invested together within four investment account managers, held at Schwab and US Bank:
- Schwab Account #12345
- Merrill Lynch account#45678
- Vanguard account #00023
- US Bank Account #00056
Fundriver University receives a $50,000 donation/gift from Donor XYZ for the Athletic Department. The University records this gift as a new individually named fund called The Athletic Fund. The University then deposits this gift/fund into the Schwab Account #12345 manager.
Because the Schwab Account #12345 manager is part of the overall investment pool, it will receive earnings from all four managers that make up the Fundriver University Investment Pool.
Notes:
- All funds held within the managers that make up the pool are co-mingled.
- There isn’t a 1:1 relationship between funds and managers.
- Any funds which are separately invested will have a separate investment pool set up in Balance.
An Endowment as a whole may have multiple investments pools within it, with each pool having its own distinct funds that are invested together within the investment managers. If an institution has separately invested funds (i.e., annuities or funds with donor restrictions regarding investment), then the organization may have multiple pools.
Scenario 2:
The Fundriver University has a group of annuities that will become part of their endowment someday but are not yet invested in their main investment pool. The University wants to track this pool of annuities in Fundriver Balance.
The annuities are separately invested in another US Bank account #00088. To track and reconcile these annuity funds held in the US Bank manager, there needs to be a new investment pool: Fundriver University Annuities Pool.
Notes:
- All funds held within the manager(s) that make up the pool are co-mingled.
- There isn’t a 1:1 relationship between funds and managers.
- These funds (above) will only receive an earnings allocation from the US Bank Account #00088.
Please see this article for other commonly used terms: Fundriver's Glossary of Commonly Used Terms and Expressions