How Do Endowment Funds Work | Children’s Health

What is an Endowment?

An endowed fund is a meaningful way for donors to support the mission of Children’s Health today, tomorrow and forever. As a permanent fund, it is invested in perpetuity with the intention to grow over time. A percentage of the fund's fair market value is then distributed annually for the fund's intended purpose. This permanent fund can support a restricted need or be used to fund areas of greatest need determined by the institution at the time of distribution by remaining unrestricted. All endowment funds can be named or created in honor of someone important to the donor.

How is an Endowment Funded?

At Children’s Health, the minimum required to establish a new endowment is $50,000. This can be funded through cash, stock or other non-cash assets, and can also be established as part of a planned gift. Endowments are established in consultation with a gift officer to create an endowment agreement.

A donor may also choose to contribute to an endowment that has already been established. This may be a fund created by another donor or a collective fund originally established by Children’s Medical Center Foundation to support our largest priorities including research, mental health, and general use.

Why Create an Endowment Fund?

By creating an endowed fund, the donor has the opportunity to honor their own legacy or the legacy of someone important to them, such as a family member, friend or clinician, in perpetuity in support of the mission of Children’s Health. Our ability to make life better for children is furthered by these permanent funds that provide continued support, while extending the legacies of generous friends and partners who have established these endowed funds or were honored by them.

All donors who establish an endowment have the opportunity to be recognized as members of our Bradford Society. This legacy society not only honors those who have chosen to remember Children’s Health in their estate plans but also uniquely recognizes those who have committed to the future of making life better for children through a legacy gift such as an endowment.

What is the Investment Philosophy at Children’s Health?

The Investment Office at Children’s Health manages the financial assets of the health care system, which include board-designated reserves in the form of a quasi-endowment, as well as donor funds entrusted to Children’s Health in perpetuity.

The Foundation’s substantial investment portfolio offers a wide array of opportunities for active investment management, giving us the opportunity to partner with talented external fund managers to identify profitable investment opportunities greater than what the broader stock and bond market can provide. Active management goes hand-in-hand with diversification across investment mandates, investing styles, geographies and asset classes. The combination of active management and diversification allows us to strive for superior investment results over time.

The four pillars of our investment approach—our long-term horizon, active management, diversification and awareness of risk—are meant to uplift the mission of Children’s Health. For the Investment Office and its immediate government stakeholders, our first duty of care is as fiduciaries for the financial interest of the hospital system and its mission, including its ability to serve future generations.

How are Endowment Funds Distributed?

The current annual spending policy for endowments at Children’s Medical Center Foundation specifies a 5% distribution of a rolling 12-quarter average of the ending fair market value of the fund. Because the endowment pool performance fluctuates from year to year, the use of a 12-quarter rolling average helps to stabilize the support these funds provide to programs. The 5% distribution rate is reviewed annually in order to protect the corpus of the endowments and to ensure the funds continue to provide sustainable, reliable support for the donors’ designated purposes. Endowment distribution policies comply with the Texas Uniform Prudent Management of Institutional Funds Act, as amended.

How do Endowments Make an Impact at Children’s Health?

More than 200 named endowments funded by donors are house by Children’s Medical Center Foundation. A range of clinical, non-clinical, research, training and community-facing areas benefit from these funds’ annual distributions, which help sustain important programs and spur new developments at Children’s Health. Examples include clinical research, mental health, team member development and education, and patient family support services such as Child Life.

Additionally, a large portion of our endowments do not have a specific designation but are instead unrestricted for the general charitable purposes of Children’s Health. These funds provide the greatest flexibility to invest in short- and long-term solutions and to explore new avenues in pediatric care.

To learn more about endowment donor stories and the impact of these funds, you can read our current and past publications online.