Administrative Fees
It is the policy of The UCLA Foundation and the University of California,
Los Angeles that a portion of the gift principal and/or income is
used to provide essential support necessary to UCLA's overall operation.
For purposes of partially defraying the costs of the University's
operation, a one-time fee based on a percentage of all gifts received
is retained by UCLA. The fee is currently 5%.
Endowment Investments
The purpose of The UCLA Foundation's
Endowment is to support the educational mission of the University
of California, Los Angeles by providing a reliable source of funds
for current and future use. The income/payout from each individual
endowment fund is used to support the purpose established by the
donor in the gift instrument. However, endowment funds are commingled
for investment purposes in The UCLA Foundation Endowment Pool
to maximize returns and minimize investment and administrative
costs.
The Endowment seeks to maximize long-term total returns consistent
with prudent levels of risk. Investment returns are expected to
preserve or enhance the real value of the endowment to provide adequate
funds to sufficiently support designated University activities.
The Endowment assets have an indefinite time horizon that runs concurrent
with the endurance of the University in perpetuity. As such, the
investment portfolio assumes a time horizon that may extend beyond
a normal market cycle and therefore may assume an appropriate level
of risk as measured by the standard deviation of annual returns.
It is expected that professional management and portfolio diversification
will smooth volatility and assure a reasonable consistency of return.1
The Endowment's portfolio is expected to generate a total annualized
rate of return, net of fees and spending that is greater than the
rate of inflation as measured by the National Consumer Price Index
over a rolling 5-year period. The UCLA Foundation accomplishes these
objectives by engaging a number of professional managers who are
assigned specific investment mandates for equities, fixed income
and alternative investments.
Endowment Distributions
The Foundation's spending policy governs the rate at which funds
are released to fund holders for current spending. The Foundation's
spending policy is based on a target rate set as a percentage
of a rolling market value. The current rate is 4.9% for fiscal
year 2005-06. The Board of Directors of The UCLA Foundation reviews
and approves this rate annually. Investment returns earned in
excess of the approved spending rate are retained in the endowment
principal to protect from the effects of inflation and to allow
for growth. During periods of investment market decline, endowment
distributions for newer funds may, if needed, reduce the fund
value to assure that predictable funding is available for individual
endowed fund program activities and objectives.
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