How does an endowment work?
A. The donor stipulates that the principal (endowment corpus) must be invested and that only a portion of the income may be expended to carry out the donor’s purpose as designated in a memorandum of understanding. To guard against the eroding consequences of inflation, the remaining portion of investment return is then added to the principal. New gifts, long-term investment performance and a prudent spending policy influence the growth of endowments. The goal is to ensure that the principal maintains its purchasing power over time to support future generations.
