Financial Performance
Fiscal Year 2009 contributions
Thanks to contributions from more than 15,310 generous donors, the Minnesota Medical Foundation (MMF) celebrated its 70th anniversary with a record-breaking year in 2009, raising $124.9 million for the University of Minnesota Medical School, School of Public Health, Masonic Cancer Center, and related units in the Academic Health Center. These contributions—highlighted by a $50 million pledge to the University of Minnesota Amplatz Children’s Hospital and a $40 million pledge to the Schulze Diabetes Institute—were allocated to the following areas:
| Research | $51.0 million (40.9%) |
| Capital Improvements | $50.3 million (40.3%) |
| Academic Program Support | $13.6 million (10.8%) |
| Faculty Support | $7.1 million (5.7%) |
| Scholarships | $2.6 million (2.1%) |
| Other | $0.3 million (0.2%) |
Committed to protecting and fulfilling donor intent
MMF has not been immune to the recent economic downturn. The dramatic changes affecting the financial services industry and overall economy are historic in scope and proportion. Since 2008 the markets have experienced unprecedented levels of volatility, and like many other organizations MMF has felt the consequences. Nevertheless, our overall financial performance is comparable to peer institutions and we are greatly encouraged by the unwavering support of our donors. The foundation remains committed to a long-term endowment investment strategy based on broad portfolio diversification.
In addition to underscoring the need for closely managing risk and return, another clear lesson of this economy has been the importance of protecting liquidity. The foundation has not experienced any liquidity constraints and has met all cash flow obligations.
Minnesota Medical Foundation endowment
Donors establish permanent endowments at MMF to provide a source of continuing support for their charitable intent. This includes funding for research, faculty recruitment and retention, student support and recognition, and patient care. Endowments also can serve as a way to honor or memorialize a special individual.
Endowment management and investment strategy
In managing its permanent endowments MMF has two main objectives:
- to provide a stable and consistent source of financial support for the stated charitable purposes
- to protect the purchasing power of endowments over time
The foundation invests the endowment in a diversified portfolio with asset allocation targets and ranges including domestic equity, international equity, fixed income, and alternative investments including real estate, private equity, and venture capital. This allocation is designed to meet the foundation’s overall investment objectives.
MMF’s endowment is overseen by an investment committee appointed by the board of trustees. The investment committee is responsible for implementation of the investment policy statement, which outlines investment strategy, objectives, and asset allocation.
Endowment spending policy
For funds invested in MMF’s endowment, distributions for spending are provided on a quarterly basis. These distributions provide the dollars available for spending on the donor’s designated area of support and are based on the preceding 20-quarter average market value of the fund, multiplied by an annual payout rate of 4.75 percent.
Underwater endowment recommendations
Given the severity of the economic downturn, MMF has taken a number of steps to protect and eventually restore permanently endowed funds that are underwater (defined as funds where current market value is lower than total gifts contributed since inception). A set of recommendations was developed by MMF and approved by the foundation’s board of trustees. These recommendations became effective July 1, 2009, and include the following:
- For all scholarship endowments that receive matching funds, MMF’s current endowment spending policy will be applied. (Distributions for spending are based on the preceding 20-quarter average market value of the fund, multiplied by an annual payout rate of 4.75 percent.)
- For endowments that are above water or underwater less than 25%, MMF’s current endowment spending policy will be applied. (Distributions for spending are based on the preceding 20-quarter average market value of the fund, multiplied by an annual payout rate of 4.75 percent.)
- For endowments that are underwater 25% to 49%, MMF recommends suspending distributions and if there are available funds (current use or quasi balances) reinvesting these dollars whenever possible. If a distribution for spending is still essential, it will be calculated at an effective rate capped at 4.75% of the current market value (not the preceding 20-quarter average, which likely would be higher).
- For endowments that are underwater 50% or more, distributions for spending will be suspended. In addition, we will seek to reinvest any available balances (current-use or quasi balances) whenever possible.
Endowment performance
As of September 30, 2009, the value of MMF's endowment was $192.3 million.
MMF’s investment benchmark consists of a weighted blend of investment indices reflecting our investment policy asset allocation targets, and provides an objective way to compare our endowment’s actual results with the investment markets. The investment goal is to earn a return equal to or exceeding the Consumer Price Index plus 5 percent over time. This goal is intended to preserve and increase the purchasing power of the endowment, thus protecting it against inflation.
Endowment management fee
MMF assesses an administrative fee on its endowment funds. The fee is set by board policy and is currently capped at 1.25 percent for permanent endowments. This fee is netted against endowment investment returns.
Charitable support over time
MMF has been able to provide a relatively stable and growing critical source of support for donors’ designated areas of interest in research, education, and patient care. The chart below illustrates the foundation’s disbursements from all funds (endowment, quasi endowment, and current use) since July 1, 1996.
