Generations of students and faculty will benefit from the annual income produced by Tufts’ endowed funds. A gift to the Tufts endowment is an investment in the future of the university. Tufts is grateful for the commitment and foresight of its donors.
The following information provides important background about how the university manages these funds.
Investment returns and generous gifts have helped Tufts significantly grow its endowment, or permanent capital, from 1990 to 2009. As of June 2009, the endowment stood at $1.14 billion.
Shares in the Endowment Pool
All new endowed funds become part of the endowment pool, which is managed by the university’s Investment Committee with support from the University Investment Office. At the time the funds join the endowment, they acquire units in much the same manner as a mutual fund. These units provide the basis for determining an individual fund’s ownership in the overall investment pool and its share of the distributed income.
Timing of First Distribution
New endowment funds acquire units and are added to the pool effective in the first full month following the date the gift cash is received. Consequently, new endowment funds will begin to generate income for the designated purpose within a period no more than 30 days from the date of the gift.
University Spending Rule
Distribution of income from the endowment’s total return pool is determined by the university-spending rule. This rule ensures that the amount of endowment income available to support university operations increases at a stable and predictable pace. Initially, a new endowment fund will receive an income distribution equivalent to the current spending level of all funds in the pool. This is generally about 5 percent of the fund value, but will vary with market conditions. The dollar amount distributed is then increased each year by 4 percent. Adjustments will be made, however, if the distribution does not fall within a range of 4.5 percent to 5.5 percent of the endowment market value. Earnings in excess of the amount distributed are added to the individual endowment funds. In the event that market conditions temporarily drive the individual fund’s market value below the historic gift value, Tufts University may apply a payout formula to ensure that the fund provides continued support at a reduced level for the intended purpose, while also creating an opportunity for the value of the fund to recover to levels above the original gift amount over time.
Investment Strategy
Tufts’ investment program is intended to maximize endowed resources available to support the long-term welfare of the university. In order to preserve the purchasing power of these funds over time, the objectives are to grow the principal as well as the income. To fulfill these objectives while assuming an acceptable level of risk, the Investment Committee determines a Policy Asset Allocation, which is reviewed periodically. The allocation policy, adopted July 1, 2009, is reflected in the accompanying pie chart, which shows investments diversified among asset classes. Within each asset class, the Investment Committee carefully assigns a group of managers and firms specializing in different strategies, and delegates to them the task of selecting specific securities.
Tufts’ asset allocation policy ensures a well diversified portfolio that is designed to maximize returns while controlling risk
Performance as of June 30, 2009
Tufts Total Return Pool returned -24.3 percent gross of fees for the Fiscal Year 2009. On an annualized basis, Tufts returned 2.8 percent for the five-year period and 4.6 percent for the ten-year period ended June 30, 2009. Compared to the colleges and universities in the Russell/Mellon Endowment Universe, Tufts University’s return was above the median for the ten-year period.
For questions or further information, please contact the Office of Donor Relations at 617.627.5480.
