Endowment Information
One of the primary goals of the development department (as identified by the strategic planning process) is to substantially increase the endowment of Luther College.
Gifts to the endowment provide a way for you to identify with Luther's mission in perpetuity. Endowments make a difference in Luther's educational mission by providing scholarships, faculty support, and funds to improve the learning environment at Luther.
What is the Luther College endowment?
The Luther College endowment is a perpetual fund composed of donor gifts that are retained and invested by the college. Earnings from the endowment are available each year to support college programs and scholarships as designated by the donor.
What are the endowment earnings used for?
Earnings from the Luther College endowment are used for many purposes. Scholarships for students, teaching and learning resources, library books and materials, program enrichment, and student/faculty research projects are prime examples. At Luther, as at most colleges, it costs more to educate a student than what a student pays in tuition. The difference between what it costs and the tuition paid is provided by endowment earnings and by sources of current support, such as grants and annual fund gifts.
How does endowment make a difference?
A strong endowment is a key indicator of the quality and financial strength of a college. It is the gauge by which institutional stability is measured. At Luther, a strong endowment will enable the college to better position itself for the future. It will:
- provide for continual improvement and maintenance of state-of-the-art facilities;
- fund scholarships and other financial assistance to make it possible for the most deserving students to attend Luther;
- enable Luther to attract and retain gifted teachers and strengthen student learning;.
- increase opportunities for student research and faculty/student mentoring;
- enhance public perception of Luther's reputation as an innovative, dynamic institution.
What is the Luther College spending policy?
The Luther College Board of Regents has established a yearly spending rate of 5 percent. This means that each year 5 percent of the value of the endowment is taken from the earnings to provide scholarships, teaching support, and other program enhancements. All earnings and growth of the endowment over the 5 percent spending allowance are reinvested in the endowment fund.
The spending rate of 5 percent of the value of the endowment is calculated on the endowment's twelve-quarter average market value prior to March 31 of each year. This method of calculation provides for year-to-year consistency in the value of the spending allowance.
How does the endowment grow?
The endowment grows in two ways: First, donors make gifts to the endowment that are held in the fund in perpetuity. Second, all earnings and growth of the endowment over the Board of Regents' annual 5 percent spending allowance are reinvested in the fund.
What is the endowment growth goal?
The endowment growth goal is established by the Luther College Board of Regents. The Board of Regents has established a long-term goal for the endowment to grow. To achieve this goal the endowment must grow at an average annual long-term rate of 8.75 percent, calculated as follows:
| Spending allowance | 5.00% |
| Inflation forecast | 3.00% |
| Endowment management expense | 0.75% |
| Total return needed to achieve growth goal | 8.75% |
How is the endowment invested to meet its growth goal?
The Board of Regents has established formal investment guidelines for acceptable levels of risk and return. Risk is controlled by diversifying the endowment into several asset classes, including domestic and international stocks and bonds, and alternative investments (such as hedge funds and real assets). The Board of Regents does not engage in market-timing strategies which attempt to anticipate upward or downward movements of the securities markets. Management objectives are focused on both returns and risk, not returns alone.
What is the role of Hammond Associates institutional fund consultants?
Luther College has retained the services of Hammond Associates of St. Louis, Mo., to assist the Board of Regents with investment strategies and to monitor investment performance. Hammond Associates has recommended an investment strategy which includes investing in specific asset classes with different percentage investments in each asset class, as well as endowment rebalancing parameters. The asset classes include managed and indexed stock and bond mutual funds of different capitalization sizes. Hammond Associates also monitors the endowment performance on a monthly basis and provides quarterly reports and recommendations to the Investment Committee and the Board of Regents.
Academic Endowment Opportunities at Luther College
Luther has five endowment opportunities:
- The Endowed Chair $1,250,000
- The Endowed Professorship $600,000
- The Endowed Lectureship $250,000
- The Endowed Fund for Faculty and/or Student Research Fellowships $100,000
- Endowed Scholarships $25,000 (The Legacy Trust)
For more information on each of these types of endowed gifts, see the links at the top of this page.
Questions?
If you have questions about the Luther College Endowment, or if you would like more details about the Luther College Board of Regents' investment strategy, please call the Luther College Development Office at (563) 387-1862, or (800) 225-8664, and ask to speak with a development officer.