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 1989 to 2008. As of June 2008, the endowment stood at $1.49 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 unlikely event that market conditions temporarily drive the individual fund’s market value below the historic gift value, the donors authorize Tufts University to apply the payout formula based on its then current spending policy to ensure that the fund provides immediate and consistent benefits to the department, even if application of this formula would result in the fund balance going below the historic dollar value.
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, 2005, is reflected in the accompanying pie chart, which shows investments diversified among asset classes and strategies. Within each asset class, the Investment Committee carefully assigns a group of specialized managers and firms 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, 2008
Tufts Total Return Pool returned -0.6 percent for the Fiscal Year 2008. On an annualized basis, Tufts returned 11.8 percent for the five-year period and 10 percent for the ten-year period ended June 30, 2008. Compared to the colleges and universities in the Russell/Mellon Endowment Universe, Tufts University’s return was in the top third for the one-year and the ten-year periods.
For questions or further information, please contact the Office of Donor Relations at 617.627.5480.
