Policy Concerning Separately Invested Endowments

Policy Concerning Separately Invested Endowments

This policy discusses the transfer of earnings to a quasi-endowment account. This process requires approval from the Board of Trustees.
Effective Date:
None Assigned
Administrative Category:
Applies To:
Faculty, Staff
Material Original Source:

University of Alabama at Birmingham



July 11, 1996

(Replaces "Endowment Spending Policy" dated September 18, 1990, and effective October 1, 1990.)


Related Policy

Rule 404, Investment Policy and Guidelines, The Board of Trustees of the University of Alabama Board Manual




To maximize the return on sizeable endowments which are not invested in the University of Alabama System Pool due to donor or grantee restrictions, the University of Alabama at Birmingham has the approval of the Board of Trustees to engage professional investment management. In 1990, the Board approved the selection of the first external investment manager for the Separately Invested Endowments. The Board approves and monitors the performance of all investment managers to ensure their compliance with Board Rule 420.

The Board of Trustees and the University of Alabama at Birmingham administration recognized the need to prudently manage endowment investments to balance the current and future needs of academic and health-related programs. To this end, a Spending Rate Policy applicable to all endowments was adopted by the Board of Trustees. The Spending Rate Policy seeks to preserve the purchasing power of endowments, and it also provides a reliable basis for annual budgeting of endowment income. The spendable income communicated to the appropriate administrators for budgeting purposes is based on the annual spending rate.


Policy Statement

Each October, actual earnings greater than budgeted earnings for the prior year ending will be transferred to the quasi-endowment account. Use of the earnings transferred to the quasi-endowment requires approval from the Board of Trustees. Budgeted earnings not fully used will remain available for spending. In any given fiscal year, accumulated spendable earnings may be used in addition to the current year budgeted earnings. Use of prior years' spendable earnings requires approval from the Associate Vice President for Financial Affairs. Such approval must be obtained at least ninety days before use. Requests to use prior years' earnings will be honored only if market conditions are favorable and if such requests do not adversely affect the Investment Manager's ability to generate earnings budgeted for the current fiscal year.

This policy applies only to separately invested endowments. It supersedes the UAB Endowment Spending Policy dated September 18, 1990, effective October 1, 1990, which applied to all endowments.


Effective Date

This "Policy Concerning Separately Invested Endowments" was effective October 1, 1995, and procedures to implement it have been in place since that date.