How an Endowment Gift Works

Gifts that establish endowed funds become part of Seton Hall's endowment. As the permanent capital of the University, the endowment represents a collection of funds established by donors to provide perpetual support for University priorities including financial aid, general operations, faculty support and development, teaching and research activities and a wide variety of activities and purposes.

The endowment supports the specified funding objectives in perpetuity, retaining the principal and distributing an established percentage of the fund's earnings. This helps to provide a shield against corrosive power of inflation.

Endowed funds are able to keep pace by distributing a percentage of what is earned; the balance of earnings is returned to the corpus to encourage continued growth. Therefore, income distributed from an endowed fund provides resources that enable the University to support faculty, programs and students not just for one year, but for generations.

In this step-by-step example, you’ll see the impact of an endowed gift and the benefits that accrue to Seton Hall, our students and the donor.

  1. A Stillman School of Business alumna makes a $100,000 gift* to establish a named endowed scholarship in memory of her father at her alma mater.
  2. A gift agreement is presented to her, which articulates the gift’s purpose, a fulfillment schedule (gifts can be paid over a period of time) and the amount of her gift. This agreement, between Seton Hall and the alumna, will be permanently on record to guide those who will administer the fund in the future.
  3. Once a fund is created into which the donor’s gift can be placed, Seton Hall prudently invests the donor’s gift across major asset classes in the University’s portfolio to maximize long-term total return, within acceptable levels of risk.
  4. The Board of Regents determines the annual spending rate (currently 4.5 percent) that the University will apply. Using a three-year moving average of the entire investment portfolio, the spending rate is applied to arrive at a grand total for distribution. The fund’s principal remains intact.
  5. Generated earnings are then distributed from each individual endowed fund on a proportional basis. To support careful management and oversight of the distributed earnings, the earnings — earmarked exclusively for spending — are placed into a separate fund. Therefore, each individual endowed fund has a “retained earnings” component maintained separately from its corpus. This strategy allows Seton Hall to build value over time and maintain spending distributions when portfolio performance is less than the 4.5 percent annual spending rate.
  6. The named fund continues to grow, ensuring future scholarship support.

The example here is just one of the many ways endowed gifts can have a real institutional impact. In addition to scholarships, donors can endow faculty professorships or support academic programs, student activities, the library, athletics or other programs or departments.

*$50,000 is the minimum required gift amount.