What is an Endowment Fund?
An endowment fund is created when a donation is made to a non profit organization such as a charity, hospital, or university.
In a true endowment, the principal amount donated cannot be spent (held in perpetuity), and is used to generate income which must be spent in accordance with the donors wishes. As the endowment principal is not spent, it is normally invested in long term investments to generate the income.
The endowment fund is set up by the organization to deal with the administration of the endowment. The endowment fund will normally establish an investment policy to deal with how the fund can be invested, a withdrawals policy to establish how much can be taken from the fund, and a usage policy to determine how the funds withdrawn can be spent.
For further information see the Wikipedia endowment fund definition.
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