You may have heard about Harvard’s or Yale’s multi-billion dollar endowments. But how do universities like Harvard, Yale, or other institutions have such large endowments? And how are these endowments created? And what exactly is an endowment?
Well, the term "endowment" can have multiple meanings depending on what industry you’re referring to (e.g. mortgages, policies, etc.), but in this article we’re going to focus on endowments as the money donated to institutions. So, an endowment at its core can be defined as a monetary donation made by a person or entity to an institution.
Endowments can be set up by the donor, i.e. the person or entity making the donation, or by the donee, the institution receiving the donation. Some of the biggest endowments have been around for a long time. This is because endowments generally tend to grow over time. Why? We’ll explore this question and the others in the pages that follow.
In this article, we’ll take a look at how endowments are created, how they grow and decline, what universities have some of the biggest endowments, and how to donate to or set up an endowment.
Next, we’ll go over a hypothetical situation to show how an endowment can be created.