View Frequently Asked Questions
This page provides answers to many of the frequently asked questions about the Grinnell College endowment.
Grinnell College’s endowment, like other college and university endowments, is a collection of funds that supports students and faculty, as well as Grinnell’s educational mission. Endowment funds are essential to Grinnell’s financial sustainability, meaning that investments are designed to be sustainable over the long term. Every contribution to the endowment creates a fiduciary relationship between the donor and the College; managing the endowment requires detailed record keeping and careful stewardship.
The Trustees of Grinnell College are fiduciaries of the endowment, legally required to act in the best interest of the College and to act as prudent investors when managing the funds.
Fiduciary, which comes from the Latin fidere – to trust – means that board members, as stewards of public trust, must act for the good of the organization rather than for the benefit of themselves. Fiduciary duty requires board members to stay objective, responsible, honest, trustworthy, and efficient. They are expected to exercise reasonable care in all decision-making and avoid placing the institution under unnecessary risk. It also means board members ensure the programs align with the mission and that the impact of said programs is measured and reasonable.
In the majority of cases, when a donor establishes an endowed fund, they make an initial gift. That original donation is invested and the resulting income is used to support a purpose that the donor designates. This designation is specified in an agreement between the donor and the College.
Spending the initial investment itself (or spending for a purpose other than that specified by the donor or donors) is illegal. The rules for when and how non-profit organizations like Grinnell may invest and spend the income from endowed funds come from a federal law called the Uniform Prudent Management of Institutional Funds Act, which was passed by Congress in 2006 and adopted in Iowa as Iowa Code 540A.103.
Two ways. First, through generous gifts from Grinnell’s alumni and friends. Second, through investment returns – income and appreciation of the various investments held by the endowment.
There are two classifications for endowment funds. Unrestricted funds may be used for any purpose that supports the mission and strategic goals of Grinnell College. Restricted funds must be used for the purpose specified by the original donor of the funds.
Many of the smaller funds that make up the Endowment each have specific restrictions on what they can be used for. That’s why investment returns and interest are so important – the original gift value of each endowed fund given to Grinnell (the "principal" of the gift) can’t be spent because they are meant to provide income “in perpetuity” (that’s forever).
Grinnell College’s Endowment Spending Policy establishes the rules for spending from the endowment to balance today’s needs with those of future generations of students. It provides support for current operations while safeguarding the long-term purchasing power of the endowment. It also provides documentation of compliance with applicable laws regarding the management of institutional funds. The Board of Trustees monitors and approves the annual distribution.
The Endowment supports 60% of the College’s overall budget. This includes items like student financial aid and faculty and staff salaries. It also includes repayment of bonds that the College has issued to pay for the construction and renovation of facilities, insurance, food, heating, cooling, and energy costs, and equipment ranging from computers and laboratory instruments to lawnmowers and ovens used by dining services in their kitchens. This makes Grinnell one of the most endowment-dependent schools in the United States.
For many reasons. The Endowment is not a big savings account that the College can use to pay for things – that $2.7 billion in market value is what generates the income that funds 60% of Grinnell’s operating budget each year. And even that income can’t be used for just any part of the budget -- in fact, the College is not free to use all of the investment income as it sees fit.
In most years, Grinnell’s annual payout from the Endowment exceeds what is added through investment returns and philanthropic gifts combined. The resulting is an annual Net Flow Rate (how funds move in and out of the endowment) of -3.5% in recent years. This means that based on the current annual payout to support operations, Grinnell spends half of the value of the Endowment every twelve years – and it’s not being replaced at the same rate. When market returns are average and Grinnell’s annual philanthropy total is less than average – as they have been since the pandemic – the Endowment can’t keep up. In fact, Grinnell is at the bottom of its peers in terms of its Endowment’s Net Flow Rate.
As part of the Board’s fiduciary duty, the Investment Committee of the Board of Trustees (Exit 182, LLC), the Investment Office and the Endowment’s fund managers actively seek opportunities to earn higher returns on the endowment than that provided by the financial markets overall. How the Endowment is invested, therefore, is the “intellectual property” created by the investment office and investment committee to generate the highest possible returns for the benefit of current and future Grinnell students.
In most cases, the legal documents and contracts governing the College’s investments include confidentiality requirements that prohibit the members of the investment office, administration, or the College’s trustees from disclosing the names of the investment managers in the endowment or details of the underlying investments. Additionally, competition for access to the top performing investment managers is fierce. Disclosing specific strategies and investments would undermine Grinnell’s ability to access top performing investment managers (or allow other institutions to copy Grinnell’s portfolio strategy), which works directly against the College’s long-term interest of generating the income needed
The Trustees of Grinnell College established a formal policy outlining the requirements for proposals to divest from particular investments and the circumstances under which divestment decisions are made. Learn more: Grinnell College Divestment Sub-Policy
The easiest way to reach us is to email us.
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If you have questions about Grinnell College's divestment policy, please review the governance section of this site before reaching out to us.