What is an endowment?
An endowment is like a savings account but only the income earned on the principal is spent. The corpus, or principal, of the fund is never spent.
How does an endowment work?
At the LSU Foundation, our goal is to earn at least 9% annually on an endowment’s principal. About half of the earnings, or roughly 4.5% on principal, is used to support the program for which the endowed gift is designated. The remainder of the earnings are applied to the principal to keep it growing and to provide a safeguard against the injurious effects of inflation. Therefore, a $1.5 million gift to create an endowed faculty chair would generate about $67,000 per year in spendable income to support that chair. And it does so forever, increasing over time as the endowment principal grows.
What will a more substantial endowment mean for LSU?
Endowments provide a dependable source of financial support that, in turn, creates the margin of excellence the University needs to realize its vision. Endowments will enable the University to attract and retain world-class faculty; recruit talented students from diverse backgrounds; fight the “brain drain” by offering a comprehensive, top-quality college education to Louisiana’s best students; strengthen academic programs; initiate and/or support new research programs; enhance outreach; and improve the campus for the 21st century.
How does LSU’s endowment compare with those at peer institutions?
The LSU Foundation endowment has more than doubled since 1999, when it was $140 million. Although impressive growth has occurred since then, much still needs to be accomplished. Many of the major public research universities with which LSU competes have endowments well in excess of $500 million. In addition, to compensate for the traditional constraints on state appropriations and tuition increases, the endowment must take on a disproportionate importance at LSU. Thus, endowment gifts are very important to LSU.
The LSU Foundation seeks to at least double the size of the endowment and to move it closer to $600 million by 2010. This will be accomplished through a substantial infusion of gifts for endowments and the effective management of the endowment principal to generate earnings through investments. A $600 million principal would provide about $30 million annually for University programs. This dependable source of annual income would have a tremendous impact on strengthening academic quality. It would allow the University to compete at the highest levels nationally in recruiting and retaining superb faculty and talented students, while creating an environment where they can thrive. And with this dramatic improvement in academic quality will come a vastly expanded capability for LSU to drive economic development and boost the quality of life for all the state’s citizens.