An endowment is a donation of money or property to a nonprofit organization, which uses the resulting investment income for a specific purpose.
An endowment can also refer to the total of a nonprofit institution’s investable assets, also known as its principal or corpus, which is used for operations that are consistent with the wishes of the donor.
Most endowments are designed to keep the principal amount intact while using the investment income for charitable efforts.
Many endowments are administered by educational institutions, such as colleges and universities.
Others are overseen by cultural institutions, such as art museums, libraries, religious organizations, private secondary schools, and service-oriented organizations, such as retirement homes or hospitals.
A certain per cent of an endowment’s assets is allowed to be used each year so the amount withdrawn from the endowment could be a combination of interest income and principal.5
The ratio of principal to income would change year to year based on prevailing market rates.