An endowment is seen as a powerful way to ensure long-term survival and sustainability of a non for profit organization ensuring a continuous, guaranteed source of income. An endowment is essentially a separate investment fund where only a portion of the earnings or interest from the invested capital is used to fund the non for profit organization.

Often this fund is managed completely independently from the non-profit, investing the principal capital in stocks, bonds, physical assets and other instruments.

When considering following suit and setting up your own endowment, there are three key policies which need to be finalized and, in some countries, legally formalized:

The investment policy:
This policy lays out what types of investments a manager is permitted to make and dictates how aggressive the manager can be when seeking to meet return targets. This policy will need to be undertaken with a trusted investment advisor and should take into account the concepts noted in the previous section.

The withdrawal policy:
This policy sets out stipulations around what percentage of funding the organization is permitted to access from the fund at any given time. The withdrawal policy is based on the needs, and sometimes legal regulation of the country of registration, of the organization and takes into account the amount that remains in the fund.

The usage policy:
This policy details what the extracted capital can and cannot be used for and serves to ensure all funding is adhering to the original purpose of the endowment.

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