UBC has a fiduciary obligation to manage and fulfill the intentions of the endowment funding.
The UBC Endowment is governed in accordance with UBC’s Endowment Management Policy (Policy FM5) and managed by UBC Investment Management, a wholly-owned subsidiary of UBC that provides professional investment management services for UBC-related funds. UBC Investment Management employs a pooled fund structure and selects external fund managers on behalf of the university based on established criteria.
Honoring Fiduciary Responsibility
Fiduciary responsibility refers to UBC’s legal duty of care to manage trust funds in accordance with common law investment standards. All stakeholders expect UBC to provide investment returns over the long term to fulfil the intentions of each financial gift. UBC has a fiduciary obligation to act in the best financial interest of the ‘purpose’ of the Endowment in this regard.
UBC’s Endowment Management Policy specifically outlines that: “The University will manage endowment funds to ensure that investment returns support the quantity and quality of projects and programs for which the endowment funds were initially established. The University’s objective is that the capital of endowment funds grows at a rate equal to inflation in order to maintain the purchasing power of the endowment funds over time.”
By investing in pooled funds, UBC is able to diversify its investments, thus reducing risk and minimizing fees and administrative costs. This approach allows the Endowment to achieve the investment returns that a) meet or exceed the university’s existing spending needs, and b) ensure the preservation and growth of the Endowment for future generations of students, faculty, and staff.
Managing the “Spend Rate”
The UBC Endowment Management Policy also outlines the need for periodic review of endowment funds to ensure that the use of these funds are providing the maximum benefit for the advancement of the university’s academic mission. The university’s Board of Governors annually reviews the Endowment “spend rate” — the formula guiding how endowment funds are used and invested — in line with this policy.
The spend rate of the Main Endowment Pool is based on long-term future expectations of market returns, not historical performance. The spend allocation for the Endowment’s budget is adjusted every year.
UBC’s Internal Audit team carries out routine reviews of endowment fund spending accounts to ensure that spending is consistent with policy, and provides an annual report.