When I make a gift to the endowment, where does my money go?

The fund is held within a pool of capital and invested by an independent team of expert investment professionals known as Washington University Investment Management Company (WashU IMC).

WashU IMC is accountable to its own board of six selected members, all of whom are current or emeritus university trustees. The board chair and Chancellor Andrew D. Martin sit as ex officio members, with the chancellor not able to vote.

The earnings of your investment generate an annual payout, between 3% and 5.5% each year. This is spent on our donors’ various designated uses, such as professorships, research funds, scholarships, and more. In this way, the endowment comprises more than 4,470 separate funds, most of which are earmarked for specific priorities.

How does the endowment grow over time?

After the annual payout is allocated, the remaining income is reinvested, serving as a permanent asset to the university. The payout happens regardless of market conditions, and by taking less than the total return in good years, WashU is able to grow the endowment over time.

We target an average return of 8–11% each year. This covers our annual payout (4–5%), accounts for inflation to protect our future purchasing power (3–4%), and generates real growth to increase WashU’s excellence (1–2%).

WashU has such a big endowment, so why does the university continue to need my money?

Over the last 40 years, and under the leadership of Chancellor Andrew D. Martin, Chancellor Emeritus Mark Wrighton, and former Chancellor William H. Danforth, our endowment has grown leaps and bounds. This is the result of our community’s generosity and our prudent stewardship of resources.

The total annual payout from the endowment accounts for between 10–12% of the university’s operating budget in a given year. If our total operating costs were $100, the endowment would give us $10–12 to spend.

Why can’t WashU just spend more of the endowment?

Because almost two-thirds of the university’s endowed funds have been restricted by donors (remember those 4,470+ distinct funds)?

What’s more, WashU IMC must follow a variety of legal parameters that limit how much the university can spend each year from the endowment in total as well as how it can allocate specific funds per individual donor agreements.

Finally, the endowment is designed to sustain the university in perpetuity. Literally, forever. Not just today’s students, but today’s students’ great-great-grandchildren and beyond. Constantly growing through careful investment. Compounding the return on investment over time.

I’m still not convinced.

Consider a hypothetical situation in which the university decided to fund most of its annual operations through money from the endowment.

(This is purely theoretical; in reality, the law prohibits WashU from spending down the corpus of our endowment. Only the investment income can be used for operations.)

In this imaginary scenario, the endowment would likely be depleted in less than three years, leading WashU to close its doors. This would defeat the endowment’s essential purpose of securing the university’s long-term future.

Anything else to say about why the university still needs my money?

Roughly 50% of financial aid comes from the university’s operating budget. That is why endowed gifts to scholarships are so important: When you make an endowed gift to scholarships, you support access for students and institutional excellence.

What is important to know about the higher endowment excise tax?

The federal government started taxing university endowments in January 2018 at 1.4%. Beginning July 1, 2026 — the start of the fiscal year — WashU’s realized earned investment income will be taxed at 4% instead of 1.4%.

What does this new higher endowment excise tax mean for WashU?

It means we go from paying approximately $20 million annually in taxes on our endowment income to roughly $57 million. That’s an increase of about $37 million, the equivalent of almost 20 full-tuition, four-year undergraduate scholarships.

How does this new higher endowment excise tax affect my gift?

Only realized investment earnings are taxed, not the principal gift itself. Even with this change, the gift principal remains intact and continues to provide permanent, reliable support. In fact, 96% of your investment income will still go directly to the university. The impact of your endowed gift remains powerful.

Are endowed gifts still a good investment?

Yes. Endowed gifts continue to be one of the most reliable ways to ensure the university’s success, now and forever. Our tax rate has increased, but 96% of investment returns still go toward supporting the endowment’s purpose.

Why should I give to the endowment?

Endowed gifts continue to be the most effective way to ensure the university’s future, even with the increased excise tax.

You can maximize your impact by providing intergenerational support. When you give to the endowment, you’re supporting generations of exceptional students — as well as talented professors and highly passionate staff — for as long as WashU exists. Philanthropy toward the endowment is a solid and sustainable investment in our mission and in our people.

I want to make a gift that is going to have a tangible impact on the university’s mission.

Think about some of the most important ways you want to improve the world: e.g., fueling biomedical research, increasing access to higher education, or eliminating health-care disparities. When you give to the endowment, you’re ensuring that WashU’s mission of research, education, and patient care continues to grow and thrive for as long as the university endures.

Any other reasons why I should make an endowed gift?

Because of the endowment’s long-term investment strategy, there is a compounding effect that amplifies the literal value and impact of your gift over time. Consider the example of St. Louis philanthropist Eliza McMillan: In 1915, she bequeathed $107,148.02 to endow the Eliza McMillan Scholarship at WashU. Her gift, whose current market value is roughly $5 million, has benefited more than 500 students since its inception and continues to provide scholarships today.

Can I trust WashU to invest my endowed gift wisely?

Your endowed gift is managed by WashU IMC, the independent team of expert investment professionals. Founded in 2006, WashU IMC is accountable to its own board of six elected members, all of whom are current or emeritus university trustees. The board chair and Chancellor Andrew D. Martin sit as ex officio members. (The chancellor is a non-voting member.) All that to say, WashU administrative leadership does not control how the endowment is managed or where it allocates its investments.

Over long-term investment periods, WashU IMC aims to achieve a 10-12% annualized return and has consistently delivered superior long-term results. Learn more about the group’s guiding investment principles and read the latest WashU IMC Endowment Annual Report (PDF).