Money or other financial assets donated to academic institutions make up university endowments. Funds for endowments are mostly obtained through charitable gifts. Colleges and universities teaching, research, and public service missions are supported through endowment monies.
All endowments, including those at universities, have a particular legal framework designed to perpetually preserve a fund of assets for a certain objective. Endowment funds often adhere to a fairly rigid set of long-term rules that specify the asset allocation that will produce the desired return without taking on excessive risk.
In the case of endowment funds for educational institutions, the money obtained is meant to pay for a portion of the institution’s operating or capital needs. Institutions may also keep a number of restricted endowments in addition to their normal university endowment fund, which is used to fund things like professorships, scholarships, and fellowships.
Colleges and universities occasionally combine numerous separate endowments into a single investment fund, allowing for a consistent investing strategy. A university endowment may resemble a mutual fund in this way.