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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 5% for fiscal year 2004-05. 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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