Create an Endowment or Expendable Fund with the Humboldt Area Foundation (HAF)
Most of the funds managed by the Foundation are endowment funds, meaning that the initial gift and future contributions are invested for perpetual growth. A portion of the earned income and appreciation is distributed to meet the donor's chosen charitable purposes each year and the rest is reinvested. As the fund increases, the amount of the award and/or the number of awards can be increased proportionally.
Although HAF’s primary focus is on building endowment funds to provide long-term community support, we also assist donors in the creation of expendable funds. Since an expendable fund’s principal can be accessed, the donor can make an immediate impact in the community by providing a large gift or a series of large gifts for a short period of time. This differs from an endowment fund, which provides support forever at a consistent rate that keeps pace with inflation.
A donor may create a new fund with a gift in any amount, however HAF asks the donor to increase the balance for an endowment to a minimum of $10,000 within five years.
Once the fund has reached $10,000, HAF recommends spending a consistent 4% of the fund balance each year (averaged over 16 trailing quarters), even though the market and the fund’s earnings fluctuate. With a conservative expectation of an 7.5% annual return, this spending policy means a $10,000 endowment fund can support an annual award of $400 and still grow to keep pace with inflation.
The Foundation’s fee for service is 1.75% of the principal balance to be taken from the income generated by the fund on a quarterly basis. For expendable funds, the minimum annual fee is $175.
Creating the fund
Foundation staff look forward to working with you to define and describe your new fund. We offer a variety of options so that you can create a fund that meets your individual preferences. With your instructions we will compose a “new fund agreement” that will provide the Foundation with specific direction so that we can administer the fund in accordance with your intentions as the years go by. You can make changes in the agreement at any time during your lifetime, simply by notifying the Foundation in writing. We are also happy to help with language for creation of a fund in your will or living trust.
You may choose to write a description of your fund and have it included in the HAF Yearbook when the fund is eventually established. We also would be glad to include a photo if you like. The Yearbook is distributed in November to approximately 9,000 people throughout the United States.
To set up a new fund, we need to know:
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Most of the funds managed by the Foundation are endowment funds, meaning that the initial gift and future contributions are invested for perpetual growth. |
- Your fund’s exact name or title
- What type of fund it will be
- What its purpose will be
It may be useful to look through the fund descriptions in our most recent Yearbook for some examples. We do have several donors who prefer to remain anonymous, so their funds are not included in these pages. This choice, of course, is available to you.
Unrestricted funds give the Foundation’s Board complete discretion to address the charitable needs of the community as they change over time.
Field of interest funds give the Foundation Board discretion to address the charitable needs of the community within a particular area of concern, such as youth services, or within a particular geographic area.
Designated funds are those from which distributions are made to a particular charitable organization chosen by the donor.
Advised funds are those from which awards or distributions are made in consultation with the donor or other advisors. In accordance with the IRS, consultation is advisory only; the HAF Board must retain legal authority over all distributions. You may want your children or your service organization to serve as advisors to the fund you create by bequest.
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Next steps After you’ve had some time to think about this, give us a call or stop by to talk with staff. Any questions? Please feel free to get in touch with the HAF Donor Services Director, Alexandra Reid. Thank you for your interest. We look forward to working with you. |
TOPServices for Endowment or Expendable Funds
• Statements for each fund, including investment activity and itemized lists of donations and disbursements
• Acknowledgment of gifts made to the fund, receipts meeting current IRS regulations, and donor thank you letters
• Independent audit of all financial transactions
• Required IRS annual tax returns filed on behalf of the fund’s activity
• Inclusion of fund description in HAF’s Yearbook with annual circulation of 9,000
• Upon request, assistance with press conference at fund’s inception and/or press release at time of grant award
• Professional charitable estate planning assistance for potential donors to the fund
Investment Management
The Humboldt Area Foundation (HAF) manages $55 million in assets and currently pools investments for over 600 funds. Investing on a pooled basis produces significant economies of scale, including: (a) enhanced diversification of assets across investment styles and money managers; (b) enhanced access to money managers that might otherwise be unavailable due to account size minimums; and (c) reduced costs due to the application of size-sensitive fee schedules to an expanded asset base. Fiscal oversight of investments is provided by the HAF Investment Committee and Board of Directors in alignment with California Prudent Investor Rules.
HAF participates in the American Funds Community Foundation Program. Specific American Fund mutual funds are joined with selected funds from the mutual fund family of DFA (Dimensional Funds Advisors) to acquire optimum pool returns. Angeles Investment Advisors, Inc. provides an in-depth third party review of HAF’s investment strategy each year with results available to the public on the HAF website at www.hafoundation.org
The Humboldt Area Foundation also offers non-risk fixed income investments for short-term expendable funds. These returns vary in alignment with prime rate fluctuations.
Asset Allocation
The Humboldt Area Foundation's assets are allocated as follows:
| 35% |
International Equities | |
25% |
Fixed Income Fund |
| 35% |
U.S. Equities | 5% |
Real Estate Securities |
Investment Returns
This asset allocation has produced the following total net returns. All returns are reported net of investment fees as of June 30, the last day of HAF’s fiscal year.
| 1999 | 16.30% |
2004 | 17.35% |
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| 2000 | 9.80% | 2005 | 11.19% | |
| 2001 | .94% | 2006 | 12.45% | |
| 2002 | -4.93% | 2007 | 17.85% | |
| 2003 | 3.06% | 2008 | -8.44% |
Administrative Fees
The annual rate of support for Foundation services is one and three-quarters percent (1.75%) of the principal balance, a portion of which is taken from the income generated by your fund each quarter. There is a minimum fee of $175 per year for expendable funds.