News & Insight

29th November 2018

Endowment funds – why to start one, and how

Francesca Hewitt shares her top tips on how to decide if endowment fundraising is right for you, and what to do about it if so.

Endowments are increasingly viewed as an essential part of a mature fundraising portfolio, providing non-profits with a level of sustainable financial security that can see them through ups and downs of changes in the funding landscape. Endowment funds generate income on invested capital for specific charitable purpose.

So, what do you need to start an endowment fund?

Reality check

Firstly, you need to decide if an endowment fund is feasible or appropriate for your organisation. Endowments work particularly well for educational or historically significant institutions, but that’s not to say that smaller non-profits shouldn’t consider establishing one also. Some of your preliminary questions should be:

Does your strategic plan require ongoing revenue to fund it?
Have you got predictable expenditure?
How old is your organisation? Is it likely to survive and still be relevant in the longer term?
Do you already have surplus funds?
What does your donor base look like?
Who will look after your investments?

Vision

Next, successful fundraising for endowment relies on your ability to create a compelling vision for the future. Endowment donors need to buy into not only the projects you’re working on, but also the importance of longevity for your organisation, the potential long term impacts and the transformations you can make not just tomorrow but five, ten, fifty and maybe hundreds of years from now. A realistic and well-articulated case for support is vital.

Resource

Make sure you find the right people to involve in your campaign. From the right leadership to the right staff identifying and engaging your key prospects, donors and advocates, it’s essential to get this right. Think about what activity you’ll want to undertake, and who will be able to steward your donors and how. Your whole organisation needs to be on board with this campaign, knowing why you are investing resource into this initiative and how they can contribute to it. This is particularly important for endowments because your organisation won’t feel the immediate ‘bang for buck’ that revenue or capital project fundraising delivers. You may need additional fundraisers, as well as PR and communications support to ensure you convey the right messages at the best times to engage people both internally and externally.

Knowledge

Do your key people know what is required of them? Have you identified the most likely prospects? Do your fundraisers have the financial literacy to talk knowledgeably about the investment strategy for your endowment fund? Are your trustees and leaders equipped to support your efforts to secure major gifts and steward relationships effectively? And importantly, will they give?

We often work with clients to help them recognise where their gaps in knowledge or resource lie, and find solutions either through providing direct support from our experienced associates or through our networks of partners and suppliers.

Timing

Finally, if you have all these things in place – the vision, resource and knowledge – you need to find the right time to launch your endowment campaign. This could be to mark a significant anniversary or to coincide with the announcement of a lead gift or as part of a matched funding campaign.

Whatever the timing that is right for you, remember that endowment campaigns are best suited to major gifts and legacies, as it takes big gifts to build a significant fund. Building an endowment is a long term undertaking.

Developing a successful strategy to launch an endowment campaign requires careful thought and considerable planning about how to resource it with the right people and knowledge, as well as to integrate this activity with your regular fundraising efforts.

What I find really exciting about endowment fundraising is that it can offer donors a lasting and impactful way to make a difference to an organisation whose mission they care strongly about, create life-long relationships between your donors and your cause, and literally transform the financial health of your organisation at the same time. It’s hugely rewarding to be part of achieving this!

How can Philanthropy Company help?

If you’re thinking about whether an endowment fund is right for you, Philanthropy Company can help you think through and answer the critically important initial questions, and then, if you decide to go forward, guide you through the next steps to successfully launch your campaign. Find out more about our fundraising consultancy services.

We can also help you analyse your in-house resources and extended networks in order to identify – and fill where appropriate – potential resource and capacity gaps that need to be addressed in advance of launching an endowment campaign. Find out more about our outsourcing, interim and other support services.

All our Directors all have held leading roles in the development and delivery of highly successful multi-million-pound endowment campaigns in Higher Education and Arts and Heritage causes. If you’re thinking about adding or reinvigorating an endowment strategy to your fundraising efforts, contact us now to help guide you through the process.

Francesca Hewitt is Director at Philanthropy Company, and formerly Head of Development at the University of Oxford’s Ashmolean Museum of Art and Archaeology, where she was responsible for one of the most ambitious and successful arts endowment campaigns: the £50 million Ashmolean Fund