Endowment (Community Essay)/ru

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An endowment is a large capital investment owned by or on behalf of an organisation that uses the income from the investments to finance its ongoing activities. The value of the endowment itself is preserved, and allows the organisation to continue operating much longer than if it had spent the initial money.

We have regularly considered a financial endowment for Wikimedia (as a movement / set of projects), or for core technical support of the projects (hardware/bandwidth). Endowments are a common way to fund charities – many large charities such as the Wellcome Trust operate solely from endowment income rather than from ongoing donations. Endowments are also common, particularly in the United States, as ways to support universities and libraries.

Creating an endowment is a perennial proposal that comes up at WMF annual planning discussions. It has also come up in each WMF board election, although in recent years the focus seems to have shifted to the amount of operating reserves the WMF should keep, defined as how long the cash would support either "spending as usual" or the essential WMF operations ("keeping the lights on") until fresh funds are raised. In the second scenario, fundraising could be less aggressive/successful than the last ones, so it is now often believed that the risk of "running out of money" is low.

Advantages

An organisation funded by an endowment can plan on a longer-term basis than an organisation funded by annually solicited one-off donations. We might not want to plan as long-term as the Oxford college that grew a grove of oak trees to replace some roof timbers after 300 years, but with an endowment we could plan for decades not years.

An organisation funded by an endowment can more credibly make longer-term commitments than one that is not. This would be particularly attractive to some of our current and potential GLAM partners; "Entrust us with a copy of your images and metadata and we have the funding to keep it on the Internet for the foreseeable future" would be a very attractive commitment for us to be able to make.

In the long run, if you create a large enough endowment you can focus staff time on investment and financial stewardship rather than fundraising.

Organisations that live off the income of an endowment do no have to be concerned so much about month-to-month public perception, though they still need to be concerned about long-term perception.

Endowments can be invested for long-term growth. The level of return on an endowment's investment tends to grow gradually with its size, growing ~2–10% faster than inflation (in contrast with current investments, which are optimized for stability and liquidity and grow at roughly the inflation rate).

Neutral

An organisation that is living off the income of an endowment might cut its cloth accordingly and not be tempted to budget for the sort of income that the Foundation could raise if it maximized revenue (or even just tried to maximize donation revenue).

Treasury costs and risks. Large sums of money need to be managed and invested. While on average large accounts have a significantly higher return on investment, a balanced portfolio is important – even sovereign nations can default or devalue.

Disadvantages

You need many times the reserves to fund yourself through endowment income than to fund yourself for another year.

"Please give us the money to keep going for another year" is an easier sell for some than "Please give us so much money that we can invest it and keep going forever".

Reduced flexibility: if you can only spend the income from an endowment you may be forced into short term cuts if it does poorly one year.

On the other hand, most organizations with endowments have both endowment and non-endowment income; and some have a process for voting to dip into the endowment.

Foot voting (or Dollar voting) is the only way the public has to affect the Foundation's decisions: reducing reliance on the annual fundraising would make the WMF less accountable and democratic.

On the other hand, this is not true only of the spending left to non-endowment income (see point above).

Proposal

Open an endowment fund, and set up a long-term investment plan for it.

Ask editors and donors to remember the endowment in their wills.

Put 10–20% of everyday fundraising into the endowment.

Put 50% of "windfall donations" – single gifts over $200k – into the endowment.

Set a goal for an initial endowment – such as $100M; reinvest returns until this is reached.

An endowment fund can start small, and it could be many years before it even grew to the point where it could fund us sufficiently to even just "keep the servers running". But it could be started now as long as we had a clear and simple divide between new donations coming into the endowment and new donations to fund current programs.

Charities have several major fundraising routes open to them. Wikimedia has become rather specialised in collecting annual one off donations, but we could start a legacy program to encourage donors and others to remember our endowment fund in their wills, and there is a natural fit between legacy income and building an endowment. With the graying of the pedia we as a community are aging faster than a year per annum, so a legacy program is a much more sensible fit to the current and future community than it would have been in our earlier years when a large proportion of editors were very young and we had few silver surfers.

If the fund were invested in an equity tracker fund, it should be fairly safe and cheap to manage. Obviously if it ever grew to be worth tens of millions then a more complex portfolio and more sophisticated management would be sensible.

Will we be relevant in...?

An endowment assumes the organization will be around essentially forever, and has good reason to be. Will Wikimedia still be relevant in 20 or 30 years – or longer? If so, why? Discuss on the talk page.

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