Jin Jiwo: What is a donation fund? What are the regulations for donation funds?

In the United States, many universities have their own donation funds. Recently, some people compared the returns of these university donation funds with those of ordinary index funds and found that university donation funds, as professional investment institutions, have lower investment performance than ordinary index funds. So what is a donation fund?Jinjiwo will provide a detailed explanation to investors in the following article.

Donation fund refers to a fund whose assets come from donations from various sectors of society, usually appearing in the education, culture, and charity industries. For example, the university donation fund mentioned at the beginning of the article is a non-profit fund initiated by donors and established within the university to use donated funds or their investment income for the purpose of promoting education and student assistance.


Jinjiwo pointed out that the assets of the donation fund are not raised, but donated by various sectors of society, with characteristics such as gratuitousness, non trading, non administrative, autonomous decision-making, social benefits, and social purpose. The assets can be monetary assets such as RMB and USD, securities such as stocks and bonds, physical assets such as real estate, intangible assets such as patents, trademarks, copyrights, etc.


Generally speaking, donation funds can be divided into the following three types based on their usage:


1Termination type: Refers to a type of donation fund established by a donor with a one-time donation or a fixed amount of donation within a certain period of time. The foundation uses up the donation fund within a certain period of time, and then the fund terminates. This type of donation fund is similar to a closed-end fund. This type of donation fund primarily uses funds obtained from donations, with no or minimal investment returns.


2Sustainable type: refers to the establishment of a fund by a donor with a one-time donation, which only uses investment income and permanently retains the donated funds. It is suitable for setting up a university donation fund named after the donor, the most typical of which is the Nobel Fund.


3Growth type: refers to the establishment of a fund initiated by donors, while donors continue to donate and join, so the foundation reinvests the investment income, thereby continuously increasing the total amount of the fund. Jinjiwo pointed out that this donation fund mainly uses investment income, which can maintain a reasonable and stable growth rate of fund amount and fund usage, and is suitable for establishing large-scale comprehensive university donation funds.


In addition, donation funds can be classified into five types based on their management models: market operation type, administrative management type, committee type, overseas expansion type, and industry dependence type.


Jinjiwo pointed out that it is worth noting that the investment portfolio frequently used by the donation fund is60%For global stocks,40%For bonds, this has to some extent led to the current underperformance of donation funds compared to index funds, which has become the norm.