The median educational endowment topped a quarter of a billion dollars this year, while total spending and returns increased. Trends like these across higher education and the broader nonprofit sector highlight just how crucial strategic fundraising is for ensuring long-term success. At its core, a growing endowment signals a mission that’s thriving and poised for future expansion. For fundraisers, development directors, and gift officers, mastering endowment fundraising best practices is essential for sustaining and accelerating organizational impact. Here’s how to strengthen your strategies.
Understanding the four types of endowments (& their differences)
Broadly, endowments are any type of managed assets used for a specific purpose, although most of the time, fundraising and development offices use the term to refer to investment funds that support nonprofits with income over long periods. The income and returns generated by this fund are then used for the specific purpose for which it was initially established. They’re often used by nonprofits, higher education institutions, and healthcare organizations for various purposes, but any organization could technically create one.
For instance, a donor might establish a mid-sized endowment of one million dollars at a university, restricting its use to provide annual tuition for a student from their former high school. Once created, the university manages the fund so that each year’s returns cover a student’s tuition without ever depleting the original gift. This perpetual impact is precisely what makes endowments so powerful; they continually fund important missions without compromising the initial investment.
Unrestricted endowments: no donor restrictions
Unrestricted endowments are the most flexible of the four types, offering maximum flexibility and allowing organizations to use them wherever the need is greatest. With no strings attached from donors, institutions can address new priorities or fund core operations.
Restricted endowments: some donor restrictions
When donors contribute with a specific vision in mind–funding scholarships, medical research, or particular initiatives their gifts become restricted endowments. These arrangements ensure a certain level of clarity and directness, as designed by the donor.
Term endowments: time or goal restrictions
Term endowments operate within a specific timeframe or until a defined goal is achieved. For example, a donor might fund a scholarship intended to last for exactly ten years, after which the organization can repurpose the remaining principal or use it directly. This structure lets organizations plan more easily or push towards a specific goal.
Quasi-endowments: board-designated, but still flexible
Quasi-endowments, or board-designated endowments, are funds set aside internally without direct donor restrictions. These offer a lot of the benefits of a traditional endowment but without any obligations to a donor. If needed, the organization’s board can adjust or reallocate these funds depending on circumstances or goals.
Why fundraise for a “limitless” endowment?
Endowments are designed to be self-generating, but there are some good reasons to fundraise, even if they aren’t exclusively for the benefit of the endowment. For example, in 2024, the NACUBO reported a 12% return for FY23, but longer-term averages hover closer to 8%, with 2023 owing to a return of -8% alone. Here’s why it’s always good to think ahead and plan for the endowment’s continued success.
1. Costs & inflation
While endowment funds are usually designed to have some level of self-generation, sometimes the draw can outpace it. Often, this is due to an increase in costs or high periods of inflation or a combination of the two.
Costs increase over time (usually due to inflation, but not exclusively). Inflation is a constant, however, and certain time periods (like the global post-COVID period) see it accelerated. Inflation reduces the purchasing power of the returns, so increasing the scale of the returns is a great way to hedge against this.
2. Increased goals or reach
Increased costs are never great, but on the flip side, increasing the scope of an endowment’s goals or expanding its reach is something to be excited about. More principal means more income, which can translate to the expansion of programs, more and better scholarships, and research opportunities. More principal can directly mean more impact.
3. Impending volatility
Foresight is always valuable, and hedging against near-term volatility is a great way to ensure an endowment continues to operate at peak potential, even in times of difficulty. Every endowment sees periods of ups and downs, and adding principal over the required maintenance number while times are good can offer some resilience during a market downturn.
4. Donor engagement
Donor engagement may not directly contribute to immediate outcomes in all cases, but the power of momentum is hard to overstate. If you’re one of the lucky organizations to be in a moment of high energy, capitalizing on that time is always valuable.
Conversely, periods of low energy sometimes require a rallying cry. Something like building back the endowment or expanding it past what it’s already doing is a great way to galvanize donors and increase engagement.
10 best practices for successful endowment fundraising campaigns
It’s easy to run a campaign on autopilot or stick to what’s normally done. Here are nine key strategies you can utilize to hone in on the campaign’s vision and fundraise more effectively.
1. Clearly define your purpose
First on our list and first in priority is clarity. Without clarity, it’s hard to sell the vision. Ask yourself the question: What exactly will this fund support? Putting parameters around what the goal is helps to frame language and define the end goal. People (donors) don’t want to get on a bus if they don’t know where the stops are.
When defining the parameters of the endowment, think about whether it’s designed for institutional growth, medical research, a scholarship with a really tight scope, or anything else. Having a narrow scope isn’t a hindrance; it’s a selling point. Donors want to know that their gift is going to empower ten local high schoolers with physics scholarships each year.
2. Ask the question
While not glamorous, making sure that the house is in order before you start pitching to donors is pretty important. Does your organization have a track record of effective fund management? Is there internal alignment and staffing behind this initiative? Is this even the right time for something like this, whether that be financially, politically, or institutionally? Without alignment and capacity, a fundraising campaign, even a well-intentioned one, is likely to stall.
3. Develop a segmented donor strategy
Strong campaigns aren’t built on haphazard email blasts. Instead, they’re built on insight and careful strategy. Tools like Altrata help fundraisers and gift officers pinpoint high-capacity donors who have both the means and the affinity to support a long-term project like an endowment. Setting up a medical research endowment for cancer? Pull a short-list of local high-net individuals who have an affinity towards cancer research funding. Trying to fundraise for a local scholarship endowment? Pinpoint successful alumni from the area who graduated with the help of scholarship money in the past. The more segmented your donor strategy, the more effective your campaign.
4. Educate around giving vehicles
When most people are asked to donate, they immediately think of cash assets. Educating potential donors about other types of gifts is a great way to expand support away from one type of asset.
Some examples of potential giving vehicles include:
- Planned giving, including bequests and trusts
- Non-cash assets like crypto, stock, and even real estate
- Naming opportunities, tiered giving levels, or other more creative gifts
Additionally, explaining meaningful tax advantages is a great way to stack the odds in your favor.
5. Center your storytelling around donors
Donors aren’t lottery machines that we can pull on until we hit a winner – they’re people, and people are moved by vision, stories, and purpose. The best campaigns tie in real-world impact (another reason why clarity is important) and center that as the thing that people are giving to, not just a “fund.” Putting donors in touch with the mission makes it tangible and personal. Funds follow the heart, major donations included.
6. Utilize a multi-channel communication plan
People rarely donate after a single touch, especially if that touch isn’t an individual conversation. Like any good marketing push, you need to make sure that your channels are aligned and firing on all cylinders. Tools like social media, newsletters, webinars, board outreach, and face-to-face meetings should all work together and utilize extremely consistent messaging. Mix themes like vision, stewardship, and even wins within your messaging for the best results. Drip updates over time, so there’s constant contact with current donors and prospects who are part of your campaign.
7. Expand your donor circle (with data)
Altrata has helped us when we don’t know somebody. We found out more than we ever could, even if we spent two weeks with all our efforts looking into that individual.
Manager of Portfolio Strategy, Texas A&M Foundation
Approaching historic givers is fine (and even recommended), but there comes a time when it’s time to expand the donor pool. But, taking it a step further, it’s likely also time to level up the prospecting strategy. Using tools like Altrata makes it easy to uncover individuals who haven’t been on your radar, but may be connected to alumni, friends of the institution, or local philanthropists who aren’t very public. Then, once you have a list, it’s even easier to rank and segment according to the most likely/highest affinity individuals. When it’s time to make the connection, having a warm introduction is a game-changer, and Altrata can help find the closest referral from you (or even a board member) to the prospect.
Simply put, data-driven platforms simplify the prospecting process and increase the likelihood of conversion. Learn more by speaking to a member of our team here.
8. Leverage existing capital campaigns
A great way to build endowments is to fold them into existing capital campaigns. For example, consider having a donor split a gift between a new building and an endowment to maintain it in perpetuity. Planned giving plays really well with this model and is a way to get long-term support without disrupting campaign goals.
9. Utilize planned giving
Planning giving is a reliable way to grow endowments over time. Instead of a big push once a year or event-based fundraising, planned gifts, like bequests, trusts, or retirement account designations, are long-term commitments that make sense with a long-term investment like an endowment. If this type of giving is something you plan to use, ensure that you have the capacity and messaging to implement it effectively.
10. Donor stewardship is key
It’s easy to move on to the next prospect after securing a gift from a donor. The best long-term, lifetime fundraisers fight that urge. Prioritizing donor stewardship isn’t just a good bet for the future; it also reflects well on your organization. When people commit to helping your mission, taking the time to thank them privately, publicly, and often is a great way to maintain relationships over the years. Giving campaigns are often make-or-break based on the strength of relationship networks. Taking a thoughtful and personalized approach to donor stewardship is the surest way to make donors feel valued.
A final endowment fundraising tip – supercharge your fundraising strategy with data
Mastering the fundamentals of endowment fundraising is essential, and layering in data-driven platforms can take your campaign to the next level.
- Pinpoint donors with wealth & giving scores: Quickly pinpoint donors who have the capacity and likelihood to give, allowing your team to focus its efforts where they matter most.
- Reduce your cold calls: Easily uncover connections to donors, alumni, and board members, then map out warm introductions to avoid cold calling.
- Seamlessly integrate data with your CRM: Plugging Altrata into your CRM gives immediate access to hand-curated donor profiles, lead scoring, and elevated donor insights.
Altrata is the definitive leader in global wealth intelligence, philanthropic insights, and relationship mapping. We simplify the prospecting funnel and get you warm referrals to the most likely to convert donors. Schedule a time to connect with a member of our team today.