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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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