By Eric Chen

The Gilman Endowment Explained

You may have heard that Gilman has an endowment, but what exactly does this mean? Where does the money for need-based tuition assistance come from? How does the money from donations contribute to the school? Although it isn’t something that many students think about, the endowment plays a pivotal role in our community. An institution’s endowment aims to secure the main portion of a school’s funds so it can grow while using a certain amount to fund operations. Currently, Gilman manages an endowment of nearly 216 million dollars, one of the highest among all nearby independent school endowments and comparable to or even higher than some small colleges.

Each year, Gilman’s Board of Trustees decides to “pull,” or withdraw, a specific percentage of the money in the endowment to spend on operations. For instance, this year, the committee voted on a 4.85% draw, which is roughly 10 million dollars. This percentage begins as a recommendation from the board-level budget and finance committee. The board’s executive committee then approves the amount if they find it reasonable. On top of the endowment draw, the committees and the entire board also vote on tuition costs and faculty salaries based on the school’s financial circumstances.

After the draw, the board-level investment committee and the business office at Gilman and Monticello Associates, a separate firm that Gilman hires to identify specific funds for investment, invest whatever money remains in the endowment to ensure a steady income from the unused money. When asked about the investment strategy for the endowment, Mr. Davis Noell ‘97, the chair of Gilman’s investment committee, answered, “The overarching strategy of the endowment is to try to deliver a return in excess of inflation that allows us to accomplish two goals: one, generate a consistent dividend essentially to the school to use in their operating budget, and then obviously, to grow the value of the portfolio over time, so that dividend can continue to get paid at payout every single year.”

The investment committee also tries to ensure that they have a balanced and diversified portfolio that allows them to achieve their risk-return objectives. They reach these goals by making various investments, such as bonds that have a fixed income return, alternative assets, private equity funds, hedge funds, and real estate funds. According to Mr. Noell, their goal is to “generate a return in excess of CPI plus 5% with 5% being a proxy for what gets paid out to the school each year to help fund the operating budget.” To clarify, CPI stands for Consumer Price Index, which measures  the overall change in consumer prices based on a representative basket of goods and services over time. Through their investments, during a 10-year period that ended on June 30, 2023, the endowment saw an annualized return of 7.4%.

As for the money pulled from the draw,  the school utilizes these funds for various operations-related purposes, such as scholarships or faculty support. For instance, the scholarship endowment contains roughly 64 million dollars. The 4.85% pulled from this amount provides need-based assistance for students who might not be able to afford the tuition or even other purposes like providing extracurricular resources to those in need or paying for global travel opportunities.

Gilman primarily raises money for its endowment through donations from parents, alumni, and friends, and the unwavering support from the school’s many generous donors is crucial for Gilman to function effectively. During the 2022-2023 school year, the school received roughly 6.6 million dollars of voluntary support. The 14 staff members within the advancement office each work with upwards of 75 donors to understand how they might be willing to support the school. According to Mrs. Heather Warnack, the Assistant Head of School for Advancement, “We work very closely with both alumni donors, parent donors, and past parent donors in order to educate them about the endowment and help them understand where the needs may be.” 

In addition to informing donors about the benefits of supporting the school, the Advancement office members meet with possible donors one-on-one about potential or planned donations. When someone is donating, they can decide the destination of their donation or if it is “unrestricted,” meaning that the school can use it for any purpose of its desire. Many people sign a “Memorandum of Understanding,” also known as an MOU, where they decide to restrict their donation so that it is spent for a specified purpose. The restricted endowment consists of 300 funds that each go toward specific purposes.

The different parts of Gilman’s endowment system work together to produce a configuration that enables the school to run successfully. Through Gilman’s extensive endowment and generous donors, the school can provide students with opportunities that other schools cannot offer. Without the endowment, students may not have access to many of the unique aspects of the school, such as the recent library renovation and the generous need-based tuition assistance that allow us to differentiate ourselves from other local private schools.