CARLETON UNIVERSITY — ENDOWMENT FUND OVERVIEW

How the endowment fund is managed
Carleton University’s endowment fund is managed like a mutual fund—contributions are pooled and invested together. Carleton’s investment committee determines the university’s overall investment policy and objectives, and choice of professional investment counsel.

The pooled endowment fund is invested in Canadian stocks and bonds and global equity. Carleton’s money managers and the rate of return on investments as of June 30, 2014 are (percentages rounded):

  • Sprott Asset Management holds 12% of the endowment and has a Canadian equity mandate. Sprott’s annualized return since inception (in 1997) is 15.5%.
  • MFS Institutional Advisors holds 30% of the endowment and has a global equity mandate. MFS’s annualized return since inception (in 2011) is 24%.
  • Phillips Hager & North holds 58% of the endowment, and its mandate is 80% in Canadian fixed income and 20% in Canadian large-cap equities. PH&N’s annualized return since inception (in 1995) is 6.6%.

How the market value is determined
Market valuations and income distributions for an individual endowment are based on the number of units the gift purchased in the endowment pool at the time the donation was made.

The amount invested, divided by the unit price at the time of the gift, equals the number of units the gift purchased. The unit price is determined by dividing the market value of the overall endowment fund by the number of units currently in the fund. For example, if $100,000 was invested when the unit value was $55/unit, then 1,818.181 units would be purchased.

Calculating the annual amount available for students or programs
The amount available for monetary awards to students or for programs each year is calculated using the four-year rolling average unit price at December 31, the current payout rate and the number of units for each donor’s endowment fund. (Donations are pro-rated for the first year’s income distribution.)

Per the Carleton University Endowment Fund Statement of Investment Policies and Goals, the payout rate (i.e., the expenditure rate for the endowment funds) currently at 4.0%, is reviewed periodically to ensure that the amount we provide for students or programs is sustainable over time regardless of changes in the value of the endowment fund due to the market performance.

To arrive at the income distribution amount for an individual endowment, the following calculations are made. (Please note the figures below are for illustrative purposes only.)

Step 1: The average unit price over the past four years is calculated. For example: Unit prices of $88.00 in 2009, $100.00 in 2010, $85.00 in 2011 and $87.00 in 2012 would result in a four-year rolling average unit price of $90.00.

Step 2: The average unit price is multiplied by the current payout rate to give the amount per unit paid out. For example: The average unit price of $90.00 is multiplied by the current payout rate of 4.0% to determine the amount per unit to be paid out is $3.60.

Step 3: The amount per unit is then multiplied by the units held by the donor’s individual endowment to arrive at the available income. For example: The amount per unit of $3.60 is multiplied by the number of units for a particular endowment, such as 1818.181 for the example above, to provide $6,545.45 for a student recipient or program that year.

For more information:
Department of University Advancement
Carleton University
Tel.: 613-520-3636 or 1-800-461-8972
Email: advancement@carleton.ca

Last updated 09-2014