Answers to Common
What is an endowment?
An endowment is a dedicated and permanent source of funding that supports our universities. It represents the Texas Tech University System's promise to use the gift and the earnings it generates to support our universities in perpetuity.
When a donor gives to an endowment, their gift is invested for long-term growth to provide lasting support. Endowments may be unrestricted for the overall benefit of a university or restricted to support a specific purpose as determined by the donor.
How large is the Texas Tech University System endowment?
The market value of the Texas Tech University System endowment has grown to more than $1.74 billion.
How much has the Texas Tech University System distributed from the endowment for its universities to spend?
In fiscal year 2022, the Texas Tech University System distributed $65.1 million to its universities. Since the Long-Term Investment Fund’s creation in 1996, the Texas Tech University System has distributed more than $803 million to its universities. Each year, the total distribution amount has increased.
What do endowments support?
Donors determine the type of program their endowment will support according to their philanthropic interests.
Endowments support nearly every aspect of our universities. The two largest categories include financial aid for undergraduate and graduate students as well as funds such as professorships that support faculty. Other common areas that endowments support include funds for academic programs, research activities, museums, facilities and a wide variety of other activities.
Who manages the Texas Tech University System endowment?
The Texas Tech University System endowment is managed collaboratively by the Texas Tech University System Board of Regents, Texas Tech Foundation and system departments who manage donor relations, award endowment funds and oversee spending. These departments include the Texas Tech University System Office of Investments, Institutional Advancement, Office of the Treasury and administrative departments at the four universities.
The Board of Regents has fiduciary responsibility for the endowment and manages it in compliance with donor restrictions and the laws of the state of Texas and the United States, including the Uniform Prudent Management of Institutional Funds Act. The board has delegated day-to-day management of the endowment's assets to the system's chief investment officer in consultation with the Investment Advisory Committee and contracted investment managers and consultants.
How are funds invested?
Because the endowment provides crucial funds that benefits students and faculty at our universities, the Texas Tech University System professionally manages our investments.
The Texas Tech University System endowment functions like a mutual fund that benefits our universities. Endowment funds are invested in a single portfolio called the Long-Term Investment Fund. The portfolio is invested in diversified assets that seek growth as well as income in order to minimize market variability and provide stable funding for our universities over time.
What is the Texas Tech University System's investment approach?
The Texas Tech University System’s investment strategy for the endowment is focused on long-term performance. While the investment team works diligently to avoid short term losses, market variability is normal.
In years that market performance is up, investment policies ensure the endowment grows. In years that market performance declines, investment policies ensure that our universities continue to have the funding they need to achieve their missions.
How is the endowment payout determined?
The amount distributed from the endowment is based on the distribution rate of 4.5% of the 12-quarter rolling average of the endowment. The distribution rate is set by system policy to ensure the long-term growth of the endowment and give our universities a consistent funding for student scholarships, faculty support, research and other uses as directed by our donors.
The Texas Tech University System distributes earnings from the endowment fund to a spendable account associated with the endowment four times each year. The quarterly distribution amount is determined by multiplying the spending rate of 4.5% times the endowment's 12-quarter rolling average for the period (not the fund's beginning balance). This calculation minimizes the highs and lows of market performance and gives our universities a more consistent stream of funds.
How do investment returns impact how scholarships, professorships or other endowed funds are awarded this year?
Regardless of the endowment’s investment return, the target distribution rate remains 4.5%. This ensures consistent funds are available each year to support the donor-directed purpose of the fund.
The Texas Tech University System endowment has met its target distribution rate of 4.5% every year since the fund was created in 1996.
What is the management fee, and how is it used?
A management fee of 70 basis points (0.7 percent) is assessed on the 12-quarter rolling average of the endowment's net asset value.
The management fee is used in accordance with the LTIF Investment Policy. It helps offset expenses related to the administrative offices of the Texas Tech University System, including the Office of Investments and Institutional Advancement.
Are endowment gifts guaranteed against investment losses?
Guided by the Uniform Prudent Management of Institutional Funds Act, the Texas Tech University System takes a long-term view of investment performance and allows an endowment to incur a loss or even go below the value of the original donor gift in a particular year. Over the long term, the value of the endowment is expected to grow.
How often is the investment performance of the endowment reviewed?
The Texas Tech University System Office of Investments provides regular reports on the performance of the endowment’s investments to the Board of Regents and the Texas Tech Foundation board of directors.
How can donors request current information about their endowment?
Donors may request current information about their endowment funds at any time. To make a request, contact our endowment compliance team.
How often is the information in this endowment report updated?
The Texas Tech University System reports its financial statements to the Texas Comptroller of Public Accounts in the third week of November. Afterward, we prepare the annual endowment report to be mailed to all endowment donors and published online, usually in the second week of December.