- What are the University pools available for investment?
- Consolidated Endowment Fund (CEF)
This CEF represents the pooling of individual endowment funds from both public and private sources. Essentially permanent funds, endowments have the longest timelines and therefore have objectives consistent with maximizing total return (principal appreciation plus income), maintaining the purchasing power of the fund, and providing a stable level of support for a broad range of academic programs and scholarships. All True and their companion quasi-restricted endowments, PUF, Term and Life Income Fund endowments are required to be invested in CEF.
- Group Income Pool (GIP)
Funds invested in the GIP are long-term reserves that support programs, capital equipment, and infrastructure needs. Such activities are reflected in various auxiliary-enterprise and support-service units initiatives. GIP is invested to maximize income until such time the reserves are needed. Funds should be invested in GIP when current income is the main goal and the funds will not be expended for a minimum of three years. Participation in GIP requires approval by the University CFO/Treasurer and the Chief Investment Officer.
- Permanent University Fund (PUF)
PUF is invested in the Consolidated Endowment Fund (CEF) and as such is guided by the same investment and spending policies. The Permanent University Fund was derived from public sources such as iron ore taxes and royalties and federal land grants. Beginning in 1985, PUF was authorized by state legislation and the Regents to match private gifts raised through University foundations to create permanently endowed faculty positions. All PUF endowments are true endowments.
- Temporary Investment Pool (TIP)
The working capital funds of the institution are invested in the Temporary Investment Pool. Funds in this pool are derived from appropriations, tuition receipts, federal grants, student loan funds, plant funds, gifts for current use, unexpended endowment distributions, and other funds derived from University operations. These funds are generally not exposed to significant market risk. Therefore, they are typically invested in high-quality, shorter term, fixed-income securities with the objective of maximizing current income while preserving principal and maintaining liquidity. Endowments are not permitted in TIP.
- Consolidated Endowment Fund (CEF)
- What are the Endowment Types at the University?
The University has five types of endowments, each defined by the degree to which principal and income distribution may be spent, and for what purpose.
Principal may never be spent; income distribution may be spent for the designated purpose stipulated by the donor. Typical funding sources include gifts, PUF matches.
Principal and income distribution may be spent for designated purpose. Typically, a Quasi-restricted endowment is set up to reinvest unspent distributed income from a True endowment.
- Quasi - unrestricted
Principal and income distribution may be spent for any purpose. Examples of funding sources include royalties or unrestricted gifts.
Principal may be spent at the end of the designated term for the designated purpose. Income distribution may be spent for the designated purpose.
- Life Income Fund Principal may never be spent. Income distribution is paid to the donor or donor designee, or combination thereof, for the life of the recipients or for a fixed period of time. Thereafter, becomes a True endowment.
- What is the difference between a True and a Quasi-restricted endowment?
The principal of a True endowment can never be spent. The income distribution from a true endowment may be spent for the endowment's designated purpose, as stipulated by the donor or by administrative decision. Most true endowments have an associated quasi-restricted endowment. Unlike true endowments, the principal of a Quasi-restricted endowment may be spent (for the designated purpose.) Therefore, income distributions from a true may be allocated to the associated quasi-restricted endowment for withdrawal at a later time.
Both the true and the quasi-restricted endowment share the same Participant ID in the financial system. A Sequence number differentiates the two: a true endowment will have a Sequence Number of "1", whereas the associated quasi-restricted endowment(s) will have a Sequence Number of "2 "(or 3, etc.)
It is important to note that not all quasi-restricted endowments are associated with a true endowment.
- Can a true endowment and its associated quasi-restricted endowment be combined?
No. Principal on true endowments may not be spent, whereas principal on quasi-restricted endowments may be spent. Although the true endowment and the associated endowment share the same Participant ID, the financial system tracks both endowments separately through the use of a Sequence number. There is no advantage to combining them.
- When does the income distribution get posted to my account?
Income is posted to an investment account at the end of the month following quarter end. I.e., the end of January, April, June (period 13) and October.
- How can I estimate the income distribution amount from an endowment?
Income distributed rates are determined by Board of Regents policy. Refer to Administrative Policy: Selecting Investment Options for University Funds, Appendix - CEF and GIP Income Distribution and Rates.
- What account gets the income distribution?
The ChartField String(s) that has been designated by a signature authority in your area. This can be an operating account if the distribution is planned to be spent (for the designated purpose, if there is one.) The income distribution can also be reinvested into a quasi-restricted endowment account (if there are restrictions regarding how the funds may be spent) or a quasi-unrestricted endowment account, thereby allowing withdrawals at a later time.
- How can I change the ChartField String(s) that receives income distributions?
Refer to Administrative Policy: Participating in a University Investment Pool, Procedure - Changing an Income Distribution Allocation for an Investment Account. Accounting Services will need to approve the change for it to become effective.
- What is a PUF endowment?
A PUF endowment is an endowment that was funded with State appropriations to match a private gift to one of the three University foundations. Therefore, PUF endowments have two parts: the University portion and the foundation portion.
Total Endowment Value = PUF match portion + Foundation Gift portion
The University portion is tracked in the financial system and updated monthly for market values, as with any other University endowment. The foundation portion is uploaded into the financial system on a quarterly basis. Therefore, total endowment values, for both portions, are available on a quarterly basis on the UM PUF Position page. Refer to Administrative Policy: Selecting Investment Options for University Funds, Appendix – Interpreting Market Values
- What are the University Foundations?
The University has three foundations:
- University of MN Foundation (UMF)
- Arboretum Foundation
- 4-H Foundation
- Can I move my endowment to/from one of the foundations?
No. Endowments, once created at the University or at one of the foundations, may not be transferred between the different legal entities.
- When are updated PUF endowment values available?
For PUF endowments, the University portion is updated monthly for market values, and quarterly for income distributions. There is a several week lag in the information being updated in the financial system.
The total value of PUF-matched endowments (including the foundation side) is always viewable in the financial system on the UM PUF Position page. Refer to Administrative Policy: Selecting Investment Options for University Funds, Appendix – Interpreting Market Value. This information is updated quarterly, with a several week lag.
Roles and Responsibilities
- Why are endowments managed by both the University Office of Investments and Banking and the Foundation(s)?
Prior to the formation of the various foundations, all gifts were received by the University directly, and invested in CEF. Since the formation of the foundations, gifts intended to support the University are invested with the foundation which received the gift. Moreover, due to state appropriations received by the University to create Permanent University Funds (PUF) endowments, many of those gifts are matched and managed by the University.
It is important to note that the University foundations are separate legal entities, each with their own Board of Directors and asset management policies.
- What tasks does the Office of Investments and Banking handle vs. Accounting Services?
The Office of Investments and Banking (OIB) oversees all University invested assets and manages the TIP, GIP, CEF, PUF,SIF and RUMINCO pools. OIB develops asset allocation strategies, hires and monitors external investment advisers, and directly invests in securities, under the guise of Board of Regents policies regarding investment of University Funds.
Accounting Services oversees the accounting for all investment accounts. They are responsible for setting up all investment accounts, approving all investment transactions on behalf of colleges/departments to include: deposits, withdrawals, and income distribution ChartField String allocations. Contact Accounting Services for questions regarding accounting related investment account transactions and reporting.
Updated Endowment Market Values
- When are endowment values updated for investment returns?
The market values for investments held in CEF and GIP are always viewable in the financial system (on the Participant Positions page). However, new month-end market values are uploaded into the financial system several weeks after each month-end. For "How to" information please see Endowments on the Finance Training Materials website.
- How do I interpret the CEF and GIP market value information in the financial system? How often is the information updated?
For "How to" information please see Endowments on the Finance Training Materials website.
Depositing and Withdrawing Funds
- I have a large balance in my operating account from accumulated distributions, what options do I have?
If you do not plan to spend the funds for at least three years, you may wish to consider depositing the funds into a quasi-restricted or quasi-unrestricted investment account.
If the main endowment is a True, Term, or Life Income Fund endowment, you may deposit the excess funds into an associated quasi-restricted endowment for withdrawal at a later time. If an associated quasi-restricted fund has not been established, contact Accounting Services. Remember, the funds can only be spent for the designated purpose. You may also consider changing the future income distribution allocation to have a larger percentage of the distribution reinvested into the associated quasi-restricted investment account.
Refer to Administrative Policy: Participating in a University Investment Pool, Procedures - Making a Deposit or Withdrawal of Funds from an Investment Account, and Changing an Income Distribution Allocation for an Investment Account. Accounting Services will need to approve the transaction for it to become effective.
- Can I spend the money in a quasi-restricted or quasi-unrestricted investment account?
The funds in a quasi-restricted or quasi-unrestricted investment account may be withdrawn for expenditure. If the endowment is in CEF, you may initiate the withdrawal in the financial system. Accounting Services will need to approve the withdrawal. Refer to Administrative Policy: Participating in an Investment Pool, Procedure - Making a Deposit or Withdrawal of Funds from an Investment Account. If the investment account is in GIP, you will need to complete Form 1638 and submit to OIB for approval by the University CFO/Treasurer and CIO. Once complete, OIB will forward the completed form to Accounting Services for further processing and approval in the financial system.
- How soon after I deposit money into an endowment will I be able to see it?
As soon as a deposit is approved by Accounting Services, it will appear as a separate line on the Participant Position page in the financial system. How soon after I deposit money into an investment account will it count toward the income distribution?
When a deposit is made, the investment account is essentially "buying shares" in the investment pool. These shares will participate in the income distribution calculation in the month following the deposit (provided the deposit was made on or before the 25th of the previous month). In other words, if a deposit is made on the 25th of July, the shares purchased with that deposit will participate in August.
- What can our department do with the money received from a legal settlement?
If there is no restriction on the funds, you may open a quasi-unrestricted investment account at the University. A decision regarding the purpose of the money should be made in order to determine the appropriate investment pool. If you need a current income stream, GIP is the correct place for this account. If you would like principal appreciation, CEF is the correct place for this account.