Endowment
An endowment is a pool of invested assets where the principal is preserved and the investment income funds nonprofit operations or programs in perpetuity.
An endowment is a fund of donated assets that a nonprofit invests for long-term growth. The principal (the original donated amount) is preserved, and a percentage of the investment returns — typically 4-5% annually — is spent on operations, programs, or other designated purposes.
Why It Matters for Fundraising
Endowments provide financial stability that no other revenue source can match. An organization with a $1 million endowment generating 5% annually has $50,000 in reliable income regardless of annual fundraising performance. Building an endowment signals organizational maturity and attracts donors who want their gifts to create lasting impact.
Building an Endowment
Most endowments are built through planned giving, major gift solicitations, and capital campaigns. Organizations typically establish an endowment policy that governs investment strategy, spending rate, and gift acceptance criteria. Starting an endowment requires patience — it takes years of accumulation before the income becomes meaningful.