Trinity University Response To Congressional Inquiry On Endowments

Trinity University Response to Endowment Inquiry
Page 1
Introduction
Founded in 1869, Trinity University is a transformational liberal arts and sciences university located in San
Antonio, Texas. The University is committed to the highest levels of academic and professional excellence
in teaching, research, learning, service, leadership, and personal integrity. The University prepares its
graduates with a liberal arts and sciences education to pursue lives of meaning and purpose. From its
origins, Trinity University has sought to make a quality education accessible to students at an affordable
price, and it manages its resources with this essential goal in mind.
The University annually enrolls approximately 2,300 undergraduate students and 200 graduate students
from 44 states and 47 foreign countries. Trinity’s diverse and talented student body includes significant
representation (33 percent) from historically underrepresented groups.
Trinity University has been supported by incredible philanthropic generosity over many years to build its
endowment, which had a market value of $1.1 billion at May 31, 2015. The University’s endowment
consists of $781 million of internally managed endowments and funds that function as endowments plus
$368 million of funds held in trust by others. These combined funds support student financial aid, student
and faculty scholarship, and other operational costs of this leading liberal arts and sciences institution.
President Danny Anderson and his executive team share with the Board of Trustees the responsibility of
overseeing the endowment of Trinity University. This oversight includes monitoring and managing the
fund, as well as reviewing and establishing policies for the effective use of the funds to serve the
educational mission of Trinity University. One of the primary fiduciary responsibilities is to provide the
next generation of students, and the generation after that, the same opportunity enjoyed by the current
generation of students. This is an essential oversight responsibility requiring a thoughtful and committed
duty of care in order to meet generally accepted and promulgated prudence standards. For if the
University spends too aggressively out of the endowment to support current needs, it is effectively
choking future generations of students; and conversely, spending too little neglects the current
generation of students in favor of future generations. Together, Trinity University leadership and the
Board of Trustees balance the responsibility of intergenerational equity—meeting the needs of the
present generation and future generations—while also taking into account the withering effect of
inflation on purchasing power over time.
Endowment by its very definition is a perpetual fund. The Board of Trustees has interpreted the Texas
Uniform Prudent Management of Institutional Funds Act of 2006 (T-UPMIFA) as requiring the preservation
of the fair value of the original gift as of the gift date of the donor-restricted endowment funds absent
explicit donor stipulations to the contrary. This law provides the University with guidelines on prudent
management, including an obligation to consider the long-term effects of inflation on endowment gifts,
and with a clear sense that this Act expects endowments to grow over time to mitigate the erosive effects
of inflation.
The University is of the strong opinion that prudence, as required by T-UPMIFA and exemplified in best
practice, is best viewed over long periods of time (i.e., 10 year cycles or longer). Shorter periods of time,
such as the three-year period of focus in the current inquiry focused on FY 2013-2015, may present an
unrealistically optimistic view of endowment returns. Other short periods, such as FY 2008-2010, might
present a view that is overly pessimistic.
Page 2
For example, Chart 1:

Endowment Volatility FY
2006-2015, displays the
University’s annual rate of
return as reported in the
NACUBO Commonfund
National Endowment Study
and the average
compounded annual rate of
return over this time period
(6.6%). Single-year
investment returns swung
from negative 13% in FY 2009
to positive 19.8% just two
years later, a swing of almost 33%, illustrating the inherent market volatility in shorter time periods, and
the risk of drawing incorrect conclusions by focusing exclusively on shorter periods of time. Therefore, the
University uses average returns over long periods of time to help smooth this volatility. The University
encourages the Committees to likewise take a long-term view of endowment performance in order to get
a clearer understanding of endowment performance.
On an annual basis, the University’s Board of Trustees reviews endowment 10-year investment return,
spending appropriation rate, and inflation metrics for the endowment as part of its fiduciary oversight.
With this information, the Board makes changes to asset allocation, spending distribution rates, and other
policies and practices as part of its duty of care for the endowment. These actions are designed to ensure
intergenerational equity.
Over the last decade, from FY 2006-2015, the University’s annual spending appropriation rate exceeded
the compounded annual net investment return adjusted for inflation, whether measured by the
Table 1: 10-Year Real Net Investment Return Less Spending University’s policy benchmark
HEPI CPI Higher Education Price Index
Average Net Investment Return (compounded annual rate) 6.6% 6.6% (HEPI), or the more general
Less: Average Annaul Inflation Rate 3.0% 2.3% Consumer Price Index (CPI-U),
Real Net Investment Return 3.6% 4.3%
as reflected in Table 1: 10-
Annual Spending Appropriation Rate 4.5% 4.5% Year Real Net Investment
Return Less Spending. In
Real Net Investment Return Less Spending -0.9% -0.2% other words, in inflation
adjusted dollars, the real
value of the overall endowment slightly fell in order meet the needs of the current generation during a
period of unique economic challenges.
This fall in real dollar values occurred during this period because the University maintained a robust
commitment to endowment support of student financial aid, student and faculty scholarship, and other
essential operating expenses, while carefully monitoring intergenerational equity balance. While the
University’s goal is to maintain endowment value in real terms over long-term cycles, the pressing needs
of student financial aid during the recent financial crisis and slow recovery influenced the University’s
decision not to lower the spending distribution rate to mitigate the erosion of purchasing power for future
Page 3
generations. The Board of

Trustees continues to closely
monitor this situation. The
University is committed to
maintaining excellence in its
student body, offering access
to bright, highly motivated,
and talented students
regardless of their ability to
pay, which is reflected by the
fact that more than 93
percent of the students
receive some form of merit or
need-based financial aid. The
University’s growing number
of Pell-eligible students over the past decade illustrates its ongoing commitment to providing access to a
broad spectrum of students, as noted in Chart 2: Percent Pell Recipients in Incoming First Year Classi.
The University’s tuition rate

compares favorably with
similar institutions in other
parts of the country ($37,856ii
for the 2015-2016 academic
year). Yet, during that fiscal
year, the University
distributed more than $43
millioniii in institutional merit
and need-based financial
assistance, resulting in a
dramatic increase in the
tuition discount rate
(institutional financial aid as a
percentage of tuition and
fees) as demonstrated in
Chart 3: Tuition Discount
Rateiv.
Financial aid continues to be

one of the fastest growing
line items in the University’s
operating budget. Although
tuition continues to increase,
net student revenues have
grown at a significantly slower pace in recent years due to the increased number of students receiving
Page 4
financial aid and the increase in the average aid package per student. As noted in Chart 4: Average Growth
in Net Tuition Revenue 2006 – 2015v, over the decade ending in FY 2015, the University’s net tuition
revenue grew on average 2.3% per year, equal to the average growth in the Consumer Price Index (CPI-
U) and 3.0% growth in the Higher Education Price Index (HEPI).
In conclusion, the University oversees its endowment based on investment returns and performance over
long periods of time in conjunction with its interpretation of prudence standards. The endowment is
effectively used to a support diverse and talented student body, funding costs that would otherwise be
borne by students and their families. This has allowed the University to modestly grow net tuition
revenue, over the past decade, at a rate comparable to general inflation rates in the industry and general
economy.
Trinity University welcomes an opportunity to join Congress in this important conversation. This is a
serious issue institutions of higher education like Trinity University work to address every day – access to
quality education at an affordable price.
Page 5
Information Regarding Trinity’s Response

Trinity has prepared its response from audited financial information where possible. Additionally,
terminology used in the response will conform to terminology used in audited financial statements
prepared in accordance with Generally Accepted Accounting Principles (GAAP), where practicable, in
order to facilitate comparability and usability of information. Where the definitions of terms used in the
inquiry differs from the GAAP-based audited financial statements, the University has attempted to identify
the possible difference in terminology.
In accordance with Financial Accounting Standards Board (FASB) in Accounting Standards Codifications
(ASC or Codification) 958, Not-for-Profit Entities (ASC 958), the University is required to report information
regarding its financial position and activities according to three classes of net assets: unrestricted net
assets, temporarily restricted net assets, and permanently restricted net assets. The net asset class
reflects the existence or absence of donor-imposed restrictions. Where the term “restriction” is used in
the University’s response, it consistently refers to external donor-imposed restrictions. These restrictions
may be time restrictions (e.g. perpetual time restriction on a true endowment’s corpus) or a usage
restriction (e.g. restriction placed on the income earned on an endowment requiring the income to be
used for a particular purpose).
Absent explicit donor restriction, funds are recorded as unrestricted net assets. The University’s Board of
Trustees may designate from time-to-time some unrestricted net assets for a particular use. Funds
functioning as endowment are for the University unrestricted net assets designated by the Board of
Trustees to function in a manner similar to true endowments.
Trinity’s endowment can be separated into two broad categories: funds held in trust by others and
internally managed endowments. Funds held in trust by others are a significant portion of Trinity’s
endowment. This is a distinguishing characteristic for Trinity’s endowment and is important when
considering oversight or governance of these funds. Most of Trinity’s funds held in trust by others are
within perpetual trusts where the trustee controls the investment asset allocation, manager selection,
custodial bank, distribution amount to the University and, for most of the trusts, the restriction on usage
of the distribution to the University. For all funds held in trust by others reported as part of the University’s
endowment in the audited financial statements, the fair value of the trust assets at the balance sheet date
is included in permanently restricted net assets. Changes in the fair value of the funds held in trust by
others is reported in the statement of activities as changes in value of split interest agreements in
accordance with GAAP. At May 31, 2015, the fair value of funds held in trust by others was $368.0 million.
Trinity subdivides internally-managed endowments into two groups: true endowments and funds
functioning as endowments (quasi-endowments). True endowments are donor-restricted funds.
Substantially all of Trinity’s true endowments have a permanent donor-imposed restriction on the corpus,
or initial gift amount. In accordance with GAAP and the Texas Uniform Prudent Management of
Institutional Funds Act (T-UPMIFA), the corpus of true endowments is reported as permanently restricted
net assets. Initially, all income earned on true endowments is recognized as temporarily restricted net
assets by the University, in accordance with GAAP and T-UPMIFA. This initial recording recognizes that
such endowments may have a usage restriction on the income imposed by the endowment agreement
with the donor (i.e. scholarships, library books, etc.) or a time restriction on usage (i.e. spending formula
as specified in the endowment agreement with the donor) or both. As the University meets these
restrictions, the funds are transferred from temporarily restricted net assets to unrestricted net assets in
Page 6
the statement of activities. Trinity’s responses will separate the endowment between funds held in trust
by others and internally-managed endowments, and also by net asset class, where appropriate, in order
to report amounts consistent with the GAAP-based financial statements.
Funds functioning as endowments are funds created by the Board of Trustees to function in a manner
similar to an endowment fund. At Trinity, funds functioning as endowments are always unrestricted net
assets, as they are absent donor imposed restrictions, as defined by GAAP and T-UPMIFA.
In the Response to Questions section of this document, the original question text is listed in bold and blue
and the University’s responses are in black in the following section. Any supplemental materials
referenced in the University responses are included in the Appendix.
All amounts listed in responses to the questions are in thousands of dollars in order to be consistent
with the University’s financial statement presentation.
Page 7
Response to Questions
Question 1
What categories of assets are included in your college or university’s endowment?
For each category, please indicate the amount of funds that are:
a. Unrestricted;
b. Permanently restricted by donors;
c. Temporarily restricted by donors;
d. Permanently restricted by your college or university (quasi-endowments); and
e. Temporarily restricted by your college or university;
As noted in the Information Regarding Trinity’s Response section of this document, Trinity University
does not use the same terminology used in the questions in all cases. For example, Trinity does not
report funds as permanently or temporarily restricted by the University (items d and e above). The
University interprets GAAP and T-UPMIFA as defining funds functioning as endowment (quasi-
endowments) as unrestricted net assets, not as temporarily or permanently restricted.
Trinity’s categories of assets for the fiscal years 2015, 2014 and 2013, as requested in question 1(a)-
(e), are as follows:
May 31, 2015 Internal External

Funds Held in
Total Trust by Others -
Temporarily Permanently Internally Permanently
Unrestricted Restricted Restricted Managed Restricted Grand Total
Endowment Cash and Cash Equivalents $ 14,442 $ 7,833 $ 10,473 $ 32,748 $ - $ 32,748
Investments at Fair Value:
Equity and Equity Mutual Funds 179,403 97,299 130,092 406,794 - 406,794
Equity Emerging Markets 24,730 13,412 17,932 56,074 - 56,074
Fixed Income 36,444 19,766 26,427 82,637 - 82,637
Investments at Lower Cost or Market:
Alternative Investments:
Distressed Securities 1,981 1,075 1,437 4,493 - 4,493
Hedge Funds 61,418 33,310 44,537 139,264 - 139,264
Private Equity 9,306 5,047 6,748 21,101 - 21,101
Real Estate 7,651 4,150 5,548 17,349 - 17,349
Venture Capital 3,151 1,709 2,285 7,144 - 7,144
Marketable Alternative Investments 3,467 1,880 2,514 7,862 - 7,862
Mineral Interest and other 321 174 233 728 - 728
Other 2,355 1,277 1,708 5,340 - 5,340
Funds Held in Trust by Others - - - - 368,010 368,010
Total as of May 31, 2015 $ 344,669 $ 186,931 $ 249,934 $ 781,534 $ 368,010 $ 1,149,544
Page 8
May 31, 2014 Internal External
Funds Held in
Investment at Fair Value:
Fixed Income 51,766 26,298 37,876 115,940 - 115,940
Commodities 5,711 2,901 4,178 12,790 - 12,790
Alternative Investments
Hedge Funds - - - - - -
Private Equity 10,077 5,120 7,373 22,570 - 22,570
Real Estate 4,647 2,361 3,400 10,408 - 10,408
Venture Capital 3,096 1,573 2,266 6,935 - 6,935
Other 2,430 1,235 1,778 5,443 - 5,443
Total as of May 31, 2014 $ 331,527 $ 168,425 $ 242,571 $ 742,523 $ 365,732 $ 1,108,255
May 31, 2013

Internal External
Funds Held in
Investment at Fair Value:
Fixed Income 46,277 26,419 43,238 115,934 - 115,934
Commodities 10,146 5,792 9,480 25,419 - 25,419
Alternative Investments
Hedge Funds - - - - - -
Private Equity 8,795 5,021 8,218 22,034 - 22,034
Real Estate 5,095 2,908 4,760 12,763 - 12,763
Venture Capital 2,607 1,488 2,435 6,530 - 6,530
Other 1,431 817 1,337 3,585 - 3,585
Total as of May 31, 2013 $ 244,190 $ 139,406 $ 228,156 $ 611,752 $ 347,459 $ 959,211
Question 1 (f)
For each restricted asset, please describe the uses for which the funds are restricted and
the amount of the fair market value of the endowment apportioned to each use. How and
why were the restrictions put into place?
The University considers “restricted” net assets within the internally managed endowment to be
those endowment funds with external donor-imposed restrictions. For these endowments, the corpus
Page 9
amount is included in permanently restricted net assets and undistributed earnings are included in
temporarily restricted net assets (reflecting a donor-imposed usage restriction on the income and/or
an implied donor-imposed time restriction on the income in accordance with GAAP and T-UPMIFA).
In addition to internally managed endowments, the University reports the fair value of its beneficial
interest in funds held in trust by third parties in permanently restricted net assets. Endowment net
assets with permanent or temporary donor-imposed restrictions, per the University’s interpretation
of GAAP and T-UPMIFA, is presented in the following tables for fiscal years 2015, 2014 and 2013. All
amounts are in thousands of dollars:
2015 Funds Held in

Internally Managed Endowments Trust by Others Total Endowments
Permanently Temporarily Total (Permanently Permanently Temporarily Total

Usage Restriction on Endowment Income Restricted Restricted Restricted Restricted) Restricted Restricted Restricted
Distinguished/Endowed Professorships $ 21,871 $ 27,514 $ 49,385 $ - $ 21,871 $ 27,514 $ 49,385
Faculty Development 2,846 4,041 6,887 - 2,846 4,041 6,887
Faculty Fellowships 1,569 4,536 6,105 - 1,569 4,536 6,105
Lectures 6,093 6,177 12,270 - 6,093 6,177 12,270
Library 3,771 4,989 8,760 - 3,771 4,989 8,760
Academic and Student Life Prizes 630 404 1,034 - 630 404 1,034
Student Scholarships 83,985 50,218 134,203 - 83,985 50,218 134,203
Student Loans 7,513 3,965 11,478 - 7,513 3,965 11,478
Facilities Maintenance 13,402 14,769 28,171 - 13,402 14,769 28,171
Other Restricted 43,230 20,897 64,127 - 43,230 20,897 64,127
General Operating Budget Support 65,024 43,986 109,010 - 65,024 43,986 109,010
Pooled Income Life Funds - 429 429 - - 429 429
Charitable remainder gift Annuities - 4,991 4,991 - - 4,991 4,991
Charitable Remainder Unitrusts - 15 15 - - 15 15
Fund Held in Trust by Others - - - 368,010 368,010 - 368,010
Total $ 249,934 $ 186,931 $ 436,865 $ 368,010 $ 617,944 $ 186,931 $ 804,875
2014 Funds Held in


Faculty Development 2,846 3,800 6,646 - 2,846 3,800 6,646
Faculty Fellowships 1,569 4,224 5,793 - 1,569 4,224 5,793
Lectures 5,993 5,699 11,692 - 5,993 5,699 11,692
Library 3,769 4,674 8,443 - 3,769 4,674 8,443
Academic and Student Life Prizes 619 373 992 - 619 373 992
Student Scholarships 80,666 47,823 128,489 - 80,666 47,823 128,489
Student Loans 7,513 3,638 11,151 - 7,513 3,638 11,151
Facilities Maintenance 13,397 11,890 25,287 - 13,397 11,890 25,287
Other Restricted 42,202 19,400 61,602 - 42,202 19,400 61,602
General Operating Budget Support 62,192 36,452 98,644 - 62,192 36,452 98,644
Pooled Income Life Funds - 399 399 - - 399 399
Charitable remainder gift Annuities - 4,448 4,448 - - 4,448 4,448
Charitable Remainder Unitrusts - 189 189 - - 189 189
Funds Held in Trust by Others - - - 365,732 365,732 - 365,732
Total $ 242,571 $ 168,425 $ 410,996 $ 365,732 $ 608,303 $ 168,425 $ 776,728
Page 10
2013 Funds Held in
Faculty Development 2,846 3,422 6,268 2,846 3,422 6,268
Faculty Fellowships 1,569 3,857 5,426 1,569 3,857 5,426
Lectures 5,794 4,980 10,774 5,794 4,980 10,774
Library 3,769 4,156 7,925 3,769 4,156 7,925
Academic and Student Life Prizes 617 307 924 617 307 924
Student Scholarships 77,207 41,291 118,498 77,207 41,291 118,498
Student Loans 7,513 2,890 10,403 7,513 2,890 10,403
Facilities Maintenance 8,770 10,426 19,196 8,770 10,426 19,196
Other Restricted 41,693 14,531 56,224 41,693 14,531 56,224
General Operating Budget Support 56,573 29,560 86,133 56,573 29,560 86,133
Pooled Income Life Funds - 613 613 - 613 613
Charitable remainder gift Annuities - 4,334 4,334 - 4,334 4,334
Charitable Remainder Unitrusts - 179 179 - 179 179
Funds Held in Trust by Others - - - 347,459 347,459 - 347,459
Total $ 228,156 $ 139,406 $ 367,562 $ 347,459 $ 575,615 $ 139,406 $ 715,021
Page 11
Question 2
Does your college or university hold any investments that are not included in the
endowment? If so, what are they, and what are their fair market values and basis? How are
they used to further the educational purpose for the college or university?
In addition to the endowment investments, the University has various working capital funds held in
various short-term and intermediate-term fixed income securities. These investments are comprised
mostly of U.S. Treasury and Agency securities, mortgage-backed securities and investment grade
corporate debt. The University has an Operating Pool Investment Policy Statement governing the
investments and usage of these funds.
Working capital funds include general operating budget funds, risk reserves, unrestricted construction
project funds, unspent research grant funds, student loan funds pending disbursement, restricted
scholarship gift funds pending disbursement, funds for bond principal and interest pending
disbursement and other funds.
How are they used to further the educational purpose for the college or university?
These working capital funds support the educational mission of the University by providing the
working capital necessary to meet payroll and other operating budget needs, providing reasonable
risk reserves for liquidity purposes, supporting construction and renovation of plant assets and
supporting academic and student life initiatives on campus.
The University accounts for these investments at fair value and does not recognize a different basis
amount. The fair value of working capital investments for FY 2015, 2014 and 2013 are as follows:
Working
Capital
Investments
Fair Value
2015 $ 34,743
2014 34,140
2013 12,785
Page 12
Question 3
What is your endowment size, as measured by total fair market value of its assets? What
has been the net growth and net investment return your endowment each year?
For financial statements prepared in accordance with GAAP, the University has elected to report its
alternative assets, including hedge funds, private equities, mineral interests and real estate at the
lower of historic cost or fair value. The remainder of the endowment is reported at fair value. The
value of the University’s endowment as reported in its annual audited financial statements is
presented in the following table:
Funds Held
Internally in Trust by
Managed Others Total
2015 $ 781,534 $ 368,010 $ 1,149,544
2014 742,523 365,732 1,108,255
2013 611,752 347,459 959,211
What has been the net growth and net investment return your endowment each year?
The University’s net growth in endowment net assets was $41,289 in FY2015, $149,044 in 2014 and
$91,870 in 2013. The net growth in endowment net assets for FY 2015, 2014 and 2013 is reflected in
the following tables:
2015
Funds
Held in
Internally Trust by
Beginning Net Assets $ 742,523 $ 365,732 $ 1,108,255
Net Investment Income 57,770 19,801 77,571

Appropriated For Spending (35,143) (17,523) (52,666)
Contributions 5,962 - 5,962
Transfers and Other 10,422 - 10,422
Net Growth in Net Assets 39,011 2,278 41,289
Ending Net Assets $ 781,534 $ 368,010 $ 1,149,544

Page 13
2014
Funds
Held in
Internally Trust by
Beginning Net Assets $ 611,752 $ 347,459 $ 959,211

2013
Funds
Held in
Internally Trust by

Transfers and Other 604 - 604
Ending Net Assets $ 611,752 $ 347,459 $ 959,211
Trinity’s net return on investments is calculated by dividing the net investment income by the
beginning net asset balance, as reported in the preceding tables. The net investment returns for FY
2015, 2014 and 2013 are reported in the following table:
Funds
Held in
Internally Trust by
2015 7.78% 5.41% 7.00%
2014 12.89% 9.78% 11.77%
2013 16.16% 13.45% 15.16%
Page 14
Question 4
How much has your college or university spent each year to manage the endowment, and
how many staff and contractors are employed to manage the endowment? For any fees
paid to nonemployees for investment advice, asset management, or otherwise, please
provide detail on the amounts paid, to whom, and the fee arrangement.
The following table lists the investment expenses netted against investment income per the financial
statement footnotes for each year:
Funds
Held in
Internally Trust by
2015 $ 2,616 Unknown $ 2,616
2014 1,720 Unknown 1,720
2013 1,720 Unknown 1,720
The University employed approximately 2.5 full-time equivalent (FTE) employees as internal
investment staff for each of the three years reported. Approximately 1.5 (FTE) of these staff work full-
time on the University’s significant internally-managed mineral properties portfolio.
The University contracted with Cambridge Associates as general investment advisor for all years
reported. Additionally, beginning in FY 2014, the University contracted with a division of Cambridge
Associates to function in a semi-outsourced chief investment officer role for hedge fund and private
equity investment selection. A separate investment advisor is used for selection and assessment of
private real estate investment opportunities. All other oversight and management of the endowment
investment portfolio is performed by the University’s Investment Committee and internal staff.
For any fees paid to nonemployees for investment advice, asset management, or
otherwise, please provide detail on the amounts paid, to whom, and the fee arrangement.
Investments expenses netted against investment income, as reported in the audited financial
statements, is listed in the following tables:
Page 15
2015
Fees to non-employees Amount Fee arrangement
Consultants:
Cambridge Associates $ 665 Fixed Rate (Annual)
Holmes, Kelly and Seay (Private Real Estate) 143 Billable Hours
Golden Steven Cohen 13 Billable Hours
Total Consultants 821
Administration:
JP Morgan (Custodial Bank) 29 % of Market Value & fixed fees
Cox Smith Matthews Inc. (Legal) 28 Billable Hours
Deferred Comp. 11 % of Market Value
Fundriver (Software) 10 Fixed Rate (Annual)
Total Administration 78
Traditional Equity and Fixed Income Managers:

Silchester Internation Investors 405 % of Market Value
Capital Guardian Emerging Mkts 277 % of Market Value
Barrow Hanley (Equity) 195 % of Market Value
Dodge & Cox Fixed Income 183 % of Market Value
Somerset Global Emerging Mkts 179 % of Market Value
Bristol Equity Strategy 138 % of Market Value
Brandywine Global Fixed Income 116 % of Market Value
SSgA MSCI United States Index 88 % of Market Value
SSgA MSCI ACWI Global ex US 71 % of Market Value
Total Traditional Equity and Fixed Income Managers 1,653
Energy Spectrum VII (PE) 61 % of Market Value + performance bonus
Encap Energy Capital X (PE) 2 % of Market Value + performance bonus
Woodside Fund IV (VC) 1 % of Market Value + performance bonus
Dover Street VIII (PE) 1 % of Market Value + performance bonus
Park Street Capital VI (PE) 0 % of Market Value + performance bonus
Total Alternative Investments 65
Investment fees paid FY15 $ 2,617

Page 16
2014
Consultants:
Cambridge Associates (Consultant) $ 353 Fixed Rate (Annual)
Holmes, Kelly and Seay (Private Real Estate) 43
Administration:
Fundriver (Software) 2 Fixed Rate (Annual)

Marshfield 148 % of Market Value
Capital Guardian Emerging Mkts 72 % of Market Value
Marsico Capital Management 9 % of Market Value
Student Managed Fund (Equity) 1 % of Market Value
Dover Street VIII (PE) 3 % of Market Value + performance bonus
CCIP#5 2 % of Market Value + performance bonus
CCIP#6 1 % of Market Value + performance bonus

Page 17
2013
Consultants:
Cambridge Associates (Consultant) $ 242 Fixed Rate (Annual)
Holmes, Kelly and Seay (Private Real Estate) 63
Golden Steves Cohen 13 Billable Hours
Administration:
Other 85 Varies
O&G Legal Fees 24 Va ri es
Current Fund 21 % of Market Value & fixed fees

Marshfield 127 % of Market Value
Marsico Capital Management 92 % of Market Value
Park Street Capital VI (PE) 1 % of Market Value + performance bonus

Page 18
Question 5
If your endowment is required to file a Form 990 separately from your college or
university’s Form 990, please provide the endowment entity name(s) and Employment
Identification Number.
The University does not file a separate IRS Form 990 for its endowment.
Page 19
Question 6
How does your college or university determine what percentage of the endowment will be
paid out each year? If any, what has been the target endowment payout as a percentage of
the endowment’s beginning balance each year? If that answer differs from the percentage
paid out, please explain why. Please attach any payout policies or guidance.
The University’s Board of Trustees has interpreted T-UPMIFA as requiring the preservation of the fair
value of the original gift as of the gift date of the donor-restricted endowment funds absent explicit
donor stipulations to the contrary. As a result of this interpretation, the University classifies as
permanently restricted net assets (a) the original value of gifts donated to the permanent
endowment, (b) the original value of subsequent gifts to the permanent endowment, and (c)
accumulations to the permanent endowment made in accordance with the direction of the applicable
donor gift instrument at the time the accumulation is added to the fund. The remaining portion of the
donor-restricted endowment fund that is not classified in permanently restricted net assets is
classified as temporarily restricted net assets until those amounts are appropriated for expenditure
by the University in a manner consistent with the standard of prudence prescribed by T-UPMIFA.
In accordance with T-UPMIFA, the University considers the following factors in determining to
appropriate or accumulate donor-restricted endowment funds:
1. The duration and preservation of the endowment funds
2. The purposes of the University and the endowment funds
3. General economic conditions
4. The possible effect of inflation or deflation
5. The expected total return from income and the appreciation of investments
6. Other resources of the University
7. The University’s investment policy
Accordingly, the Board of Trustees has adopted a spending formula for determining the part of the
total return on endowment funds that can be expended annually. The spending formula determines
spendable endowment return as a percentage of the average of the 12 most recent quarter-end
endowment market values.
In establishing this spending policy, the University considered the long-term expected return on its
endowment. Accordingly, over the long term, the University expects the current spending policy to
allow the endowment to grow at an average of 0.5% (after inflation) annually over long time periods.
This is consistent with the University’s objective to maintain the purchasing power of the endowment
assets held in perpetuity and is, in the University’s opinion, in accordance with the prudent manager
requirements specified in T-UPMIFA.
Annually, the Board of Trustees reviews the long-term net investment returns compared to the
spending appropriation rate plus inflation in accordance with the above prudence guidelines. The
spending appropriation formula for the coming fiscal year is determined annually as an outcome of
this review process.
Page 20
If any, what has been the target endowment payout as a percentage of the endowment’s
beginning balance each year? If that answer differs from the percentage paid out, please
explain why. Please attach any payout policies or guidance.
For FY 2015, 2014 and 2013, the University’s spending formula was 4.5% of the 12-quarter average
market value as noted above. The following table reports the effective spending rate for each of these
fiscal years. The “effective spending rate” is generally understood in the industry to be that rate
derived by dividing the actual spending appropriation amount for the fiscal year by the beginning net
asset balance for that year. The effective spending rate often differs from the spending formula rate—
either higher or lower—due to numerous factors. For example, the effective rate is based on the net
asset value at a point in time (beginning of the fiscal year), whereas the spending formula is based on
a 12-quarter average market value in order to help dampen the effects of market volatility on the
spending appropriate for support of operations. Additionally, if the University is unable to fulfill the
donor-imposed use restriction on a particular endowment during a given year, the actual
appropriated spending amount, and therefore the effective spending rate, may be less than the
amount determined under the spending formula. Finally, the University has drawn additional, specific
amounts from certain funds functioning as endowments in recent years to supplement student
financial aid and recruiting operations during the recent recession and slow recovery, which tends to
increase the effective spending rate compared to the spending policy rate. The effective spending rate
for FY 2015, 2014 and 2013 is as follows:
Funds Held
Internally in Trust by
2015 4.7% 4.8% 4.8%
2014 4.9% 4.5% 4.7%
2013 4.7% 4.5% 4.7%
Page 21
Question 7
Does your college or university have policies regarding spending the endowment principal?
Has your college or university ever spent endowment principal? If so, under what
circumstances?
The University’s Board of Trustees has interpreted the TUPMIFA as requiring the preservation of the
fair value of the original gift as of the gift date of the donor-restricted endowment funds, absent
explicit donor stipulations to the contrary. As a result of this interpretation, the University classifies
as permanently restricted net assets (a) the original value of gifts donated to the permanent
endowment, (b) the original value of subsequent gifts to the permanent endowment, and (c)
accumulations to the permanent endowment made in accordance with the direction of the applicable
donor gift instrument at the time the accumulation is added to the fund. The remaining portion of the
donor-restricted endowment fund that is not classified in permanently restricted net assets is
classified as temporarily restricted net assets until those amounts are appropriated for expenditure
by the organization in a manner consistent with the standard of prudence prescribed by T-UPMIFA.
From time to time, the fair value of assets associated with individual donor-restricted endowment
funds may fall below the level that the donor, under T-UPMIFA, requires the University to retain as a
fund of perpetual duration. These deficiencies result from both unfavorable market fluctuations
occurring shortly after the investment of new permanently restricted contributions and continued
appropriation for certain programs deemed prudent by the University. There were such no
deficiencies as of May 31, 2015, 2014 or 2013.
Has your college or university ever spent endowment principal? If so, under what
circumstances?
During the financial market crisis of 2008 and 2009, the University did have certain endowment funds
for which the fair value of the fund declined to a value less than the corpus value of the original gift
amount recorded in permanently restricted net assets (i.e., underwater endowments). While the
University’s interpretation of T-UPMIFA provided that the University could determine to spend a
prudent amount of underwater endowment corpus, the University opted to suspend spending
appropriation withdrawals from these underwater endowments during that time period. Additionally,
the University transferred $120K ($120 thousand) in FY 2009 and $98.7K ($98.7 thousand) in FY 2010
from unrestricted net assets (unrestricted reserves) to restore the underwater endowments’ fair
value to equal the original gift corpus amount. Therefore, while the University is of the opinion that
T-UPMIFA provides a framework allowing the possibility of spending a prudent portion of the
endowment corpus, Trinity has not done so since the adoption of T-UPMIFA, being of the opinion
during these years, that the idea of “prudence” in managing the long-term endowment argued in
favor of maintaining and, in fact, restoring, the underwater portion of the endowment corpus.
Page 22
Question 8
How much and what percentage of the endowment’s beginning balance has your college
or university spent each year? How much and what percentage of the endowment’s return
on investments has your college or university spent each year?
The information being requested in this question is not clear to the University. Therefore, in an effort
to provide information related to the spending appropriation from the endowment, the University
will provide the effective spending rate for each year as well as a roll-forward of the endowment net
asset balance that includes investment income, beginning balances and spending appropriations,
which should provide sufficient information to support the substance of the question.
The “effective spending rate” is generally understood in the industry to be that rate derived by
dividing the actual spending appropriation amount for the fiscal year by the beginning net asset
balance for that year. The effective spending rate for FY 2015, 2014 and 2013 is as follows:
How much and what percentage of the endowment’s return on investments has your
college or university spent each year?
The University has included a roll-forward of net asset balances for FY 2015, 2014 and 2013 in the
following tables which should provide the base information needed to assess the spending
appropriation amount for the years in question:
Page 23
2015
Funds
Held in
Internally Trust by
Beginning Net Assets $ 742,523 $ 365,732 $ 1,108,255

2014
Funds
Held in
Internally Trust by


Page 24
2013
Funds
Held in
Internally Trust by

Transfers and Other 604 - 604
Ending Net Assets $ 611,752 $ 347,459 $ 959,211

Page 25
Question 9
What percentage of your endowment does your college or university devote to financial
aid for student tuition? How much for other forms of student financial aid? Please specify
the types of non-tuition financial aid provided.
The University devotes a significant amount of resources to student financial aid support. Endowment
support for student scholarships comes from two sources: true endowments with donor-imposed
restriction for student financial aid and unrestricted funds functioning as endowment which provide
general budget support (the fastest growing expense item within the operating budget is student
financial aid provided by the Institution).
The percentage of internally-managed true endowments restricted by the donor for support of
student financial aid was 24.9% ($9.1 million distributed to support financial aid), 25.1% ($8.8 million
distributed to support financial aid) and 28.4% ($8.2 million distributed to support financial aid) in FY
2015, 2014 and 2013, respectively.
How much for other forms of student financial aid?
Additionally, the University supports student financial aid with a robust commitment of unrestricted
resources, such as funds functioning as endowments. Institutional financial aid expenditures grew
from $38.3 million in FY 2013 to $43.2 million in FY 2015, a growth of $4.9 million, or 12.9%. This
continues the trend over the past decade of Trinity’s significant investment in student financial aid
from both restricted and unrestricted institutional sources. For example, per the University’s audited
financial statements, financial aid expenditures were $16.6 million in FY 2005 (representing 32.5% of
gross tuition and fees), but increased to $43.2 million (representing 50.1% of gross tuition and fees)
in FY 2015. This increase in support from the University, much of which came from the University’s
true endowments for scholarships or funds functioning as endowments used to support financial aid
and other operating expenses, reflects the University’s strong commitment to supporting student
financial aid.
The following table reports total institutional financial aid expenditures and the funded and unfunded
portion of the aid expenditures. Funded institutional aid is defined as institutional aid with specific
external restrictions on the use of the funds to support financial aid, such as true endowments,
exchange transactions such as the Texas Equalization Grant, restricted gifts, etc. The remaining
institutional aid amount is unfunded, meaning the institution is paying for the expenditure from
unrestricted resources, such as funds functioning as endowment and unrestricted operating
revenues. The summary of institutional financial aid and its funding sources for FY 2015, 2014 and
2013 follows:
Page 26
2015 2014 2013

Financial Aid Expense $ 43,176 $ 38,634 $ 38,303
Less: Funded by True Endowments 9,061 8,765 8,154

Less: Funded by Contracts and Exchange Transactions 2,415 2,626 2,498
Less: Funded by Restricted Gifts 294 351 227
Total Funded by Restricted Sources 11,770 11,742 10,879
Financial Aid Not Funded by Restricted Funds 31,406 26,892 27,424
Funds that Function as Endowments 15,325 10,342 9,584
Unfunded Financial Aid $ 16,081 $ 16,550 $ 17,840
Please specify the types of non-tuition financial aid provided.
The University typically does not offer any type of non-tuition related financial aid. However, in the
case of a small percentage of students with high demonstrated financial need, the University may
provide total financial aid assistance in excess of tuition and fees, to include coverage of a portion of
room and food service costs and textbooks.
Page 27
Question 10
Does your college or university have policies regarding whether it is allowed to accept funds
restricted to a specific purpose? Has your college or university ever declined a donation
because it was restricted to a certain purpose? If so, please describe those specific scenarios
in which your school rejected a donation.
The University has gift acceptance policies. These policies require the gift to be supportive of the
mission (tax-exempt purpose), strategic plan and needs of the University, as well as to comply with
applicable legal or regulatory requirements, and to not be harmful to the reputation of the institution.
An example of a restricted gift offer which was turned down by the University involved a recent gift
offer of real estate. The donor wished for the University to retain the property and to use it as a retail
operation. However, owning the property would not be consistent with the current strategic goals of
the University and would possibly violate the requirement of an agreement between the University
and the City of San Antonio pertaining to ownership of properties within a nearby historic district.
Accordingly, the University turned down the gift offer.
Page 28
Question 11
How much and what percentage of your college or university’s endowment is invested real
property (not including REITs or other publicly-traded securities)? Please list and describe
your college or university’s real estate holdings, including real estate held by the college or
university, the endowment, and all related entities. If the college or university has made
any Payments in Lieu of Taxes, please provide the date and amount of the payment.
The percentage of the University’s endowment portfolio invested in private real estate was $17.3
million (2.2%), $10.4 million (1.4%) and $12.8 million (2.1%) in FY 2015, 2014 and 2013, respectively.
In addition to the investments in private real estate listed above, the University has the campus land
and buildings. The following table displays the net book value of campus land and buildings for FY
2015, 2014 and 2013:
2015 2014 2013

Land and Land Improvements $ 34,413 $ 33,212 $ 33,099
Buildings 286,722 275,379 207,642
$ 321,135 $ 308,591 $ 240,741
The University has no private real estate holdings in related entities.
The University has not paid Payments in Lieu of Taxes in the past.
Page 29
Question 12
Does your college or university grant naming rights to donors based on certain donations
levels? If so, please describe the naming rights program, including how much and what
percentage of any naming rights donations your college or university has used for tuition
assistance.
The University does not have a formal policy establishing general naming rights associated with
specific giving levels. Lead gifts for large projects, such as buildings, often involve naming of the
building in honor of the lead donor. However, the University manages these situations on a case-by-
case basis, rather than automatically assigning naming rights based on a dollar amount structure.
The University has numerous true endowments with income usage restrictions established by the
donor to be used specifically for student scholarship support. Some of these are named scholarships,
reflecting the name of the endowment and in honor of the donor or donor’s identified honoree, while
some are restricted for general student scholarship report and are not named scholarships. The true
endowments restricted for scholarship support, both named and general, have been included in the
earlier information for Question 9 and is not repeated here.
Page 30
Question 13
What conflict of interest policies does your college or university have in place to address
financial interest in endowment investments (including potential conflicts of interest
among and between governing boards, trustees, executives, internal employees tasked
with overseeing the endowment, and external asset managers of endowment assets)? How
do you vet board members’ potential conflicts of interest? What are your policies if a
conflict arises with a member of the board of trustees?
A conflicts of interest and independence questionnaire is distributed to all Board of Trustee members,
Executive Staff of the Administration, and certain other members of the Administration, on an annual
basis. This information is reported to the Audit Committee of the Board of Trustees, the Chairman on
the Board and the Internal and External Auditors. If a conflict arises for a Board of Trustees member,
the Chair of the Board is notified and determines appropriate action (abstaining from discussion
and/or voting, etc.).
In addition, Investments Committee members identify any potential conflicts of interest relating to
investments and investment-related relationships at the Committee meetings. The Committee Chair
determines if a potential conflict exists and if the member should abstain from discussion and voting
on a matter. If the potential conflict relates to the Chair, the full Committee makes the determination
and any required abstinence.
The University’s primary advisor is governed by Securities and Exchange Commission standards for
conflicts of interest.
Page 31
Appendix-Documents Included
 Trinity University Consolidated Audited Financial Statements with Independent Auditors, May 31,
2015 and 2014
 Trinity University Audited Financial Statements with Independent Auditor, May 31, 2014 and 2013
 Trinity University Audited Financial Statements with Independent Auditor, May 31, 2013 and 2012
Page 32
End Notes for Introduction

i
Trinity University Fact Book 2005 - 2006 through Trinity University Fact Book 2006 - 2015;
https://inside.trinity.edu/institutional-research/university-data/factbooks.
ii
Trinity University Tuition and Fees; https://new.trinity.edu/admissions-aid/tuition-fees
iii
Trinity University Consolidated Financial Statements May 31, 2015 and 2014:
https://inside.trinity.edu/sites/inside.trinity.edu/files/file_attachments/5841/audited-financial-statement-fy15.pdf
iv
Growth in Tuition Discount Rate, FY 2005-2015
Source: Trinity University Consolidated Financial Statements FY 2005 through 2015 (in thousands)
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Tuition and Fees $ 50,999 $ 55,433 $ 58,360 $ 62,745 $ 67,122 $ 71,306 $ 73,209 $ 76,833 $ 78,944 $ 79,693 $ 86,234
Insitutional Financial Aid 16,559 17,456 21,112 23,560 25,206 28,173 31,273 34,554 38,303 38,634 43,176
Net Tuition and Fees 34,440 37,977 37,248 39,185 41,916 43,133 41,936 42,279 40,641 41,059 43,058
Tuition Discount Rate 32.5% 31.5% 36.2% 37.5% 37.6% 39.5% 42.7% 45.0% 48.5% 48.5% 50.1%
v
Trinity University Growth in Net Tuition Revenue, FY 2006 – 2015
Source: Trinity University Consolidated Financial Statements FY 2005 through 2015 (in thousands)
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Tuition and Fees $ 50,999 $ 55,433 $ 58,360 $ 62,745 $ 67,122 $ 71,306 $ 73,209 $ 76,833 $ 78,944 $ 79,693 $ 86,234
Insitutional Financial Aid 16,559 17,456 21,112 23,560 25,206 28,173 31,273 34,554 38,303 38,634 43,176
Net Tuition and Fees 34,440 37,977 37,248 39,185 41,916 43,133 41,936 42,279 40,641 41,059 43,058
Average
Growth
Per Year
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2006-2015
Consumer Price Index 3.8% 2.6% 3.7% 1.4% 1.0% 2.0% 2.9% 1.7% 1.6% 0.7% 2.3%
Trinity-Net Tuition Revenue 10.3% -1.9% 5.2% 7.0% 2.9% -2.8% 0.8% -3.9% 1.0% 4.9% 2.3%
Higher Education Price Index 5.1% 2.8% 5.0% 2.3% 0.9% 2.3% 1.7% 1.6% 3.0% 2.1% 3.0%

Trinity University Response To Congressional Inquiry On Endowments

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Trinity University Response To Congressional Inquiry On Endowments

Uploaded by

Copyright:

Available Formats

Trinity University Response to Endowment Inquiry

For example, Chart 1:

generations. The Board of

The University’s tuition rate

Financial aid continues to be

Information Regarding Trinity’s Response

May 31, 2015 Internal External

May 31, 2013

2015 Funds Held in

Permanently Temporarily Total (Permanently Permanently Temporarily Total

2014 Funds Held in

Permanently Temporarily Total (Permanently Permanently Temporarily Total

Net Investment Income 57,770 19,801 77,571

Ending Net Assets $ 781,534 $ 368,010 $ 1,149,544

Net Investment Income 78,879 33,995 112,874

Ending Net Assets $ 742,523 $ 365,732 $ 1,108,255

Net Investment Income 88,154 43,300 131,454

Ending Net Assets $ 611,752 $ 347,459 $ 959,211

Traditional Equity and Fixed Income Managers:

Investment fees paid FY15 $ 2,617

Traditional Equity and Fixed Income Managers:

Investment fees paid FY14 $ 1,699

Traditional Equity and Fixed Income Managers:

Investment fees paid FY13 $ 1,734

Net Investment Income 57,770 19,801 77,571

Ending Net Assets $ 781,534 $ 368,010 $ 1,149,544

Net Investment Income 78,879 33,995 112,874

Ending Net Assets $ 742,523 $ 365,732 $ 1,108,255

Net Investment Income 88,154 43,300 131,454

Ending Net Assets $ 611,752 $ 347,459 $ 959,211

How much for other forms of student financial aid?

2015 2014 2013

Less: Funded by True Endowments 9,061 8,765 8,154

Financial Aid Not Funded by Restricted Funds 31,406 26,892 27,424

Funds that Function as Endowments 15,325 10,342 9,584

Unfunded Financial Aid $ 16,081 $ 16,550 $ 17,840

Please specify the types of non-tuition financial aid provided.

2015 2014 2013

The University has no private real estate holdings in related entities.

End Notes for Introduction

You might also like