ENDOWED FUNDS: Gifts accepted subject to the requirement that the principal be maintained and invested to create a stream of income. Endowed funds are intended to exist in perpetuity. Only a portion of the earnings are expended to benefit the program or activity designated by the donor.  

HISTORIC GIFT VALUE: The sum of the original contributions that established an endowment fund, any subsequent donations to the fund, and any accumulations made as a result of directions in the memorandum of understandings or other gift agreements that govern the administration of the fund.  

MARKET VALUE: Sum of all contributions plus realized and unrealized earnings less distributions, fees, and assessments at a particular moment in time; typically tracked based on the last business day of the quarter. 

SPENDABLE INCOME: Funds made available from accumulated investment earnings to be used for the specific purpose designated by the donor.  

ABOVE-WATER FUNDS: Funds where the market value exceeds the historic gift value by at least the calculated spendable income and fees. 

AT-RISK FUNDS: Funds where the difference between the market value and historic gift value is less than the calculated spendable income and fees. 

UNDERWATER FUNDS: Funds where the market value is less than the historic gift value. 

SAFE ASSETS: Investments with little to no principal risk. These assets are cash, U.S. Government securities, and prime market funds. This portion of the portfolio is in place to provide capital preservation and stability during volatile periods as well as to facilitate spending and capital call requirements. Maintaining safe assets minimizes the risk of becoming forced sellers of assets during moments of market stress. 

INTERMEDIATE ASSETS: Private, finite life investment vehicles whose term is generally longer than public risk assets, but shorter than private risk assets. Since there is modest illiquidity within these investments, they seek to earn returns above market lending rates, but not as high as private risk assets. Many strategies within this asset class have a credit or contractual yield orientation, with lower correlations to public equity markets. These include strategies such as direct lending, distressed lending/sales, and niche credit opportunities. In many cases, collateral is attached to these investments and/or they seek a higher priority of payments within a stressed or distressed environment. They offer idiosyncratic return/risk profiles that are generally more predictable and consistent, thereby aiming to reduce overall portfolio risk in tandem with earning attractive returns. 

PRIVATE RISK ASSETS: The illiquid portion of the portfolio, serving as the primary return enhancement over broad public equity markets. Because of the long-term nature of the endowment’s capital, the portfolio can hold illiquid investments that may take years for profit realization. While the use of capital is sacrificed during this time frame, these investments are held to higher hurdles of performance, as they are expected to earn a significant return premium over public market equivalent investments. These investments seek to invest in the debt and/or equity of businesses as well as physical assets. A wide variety of strategies is utilized across varied geographies, sectors, and liquidity profiles, so as to achieve market and vintage year diversification. 

PUBLIC RISK ASSETS: These are primarily liquid investments. These investments are traded in liquid markets/exchanges. Within this section of the portfolio, a number of uncorrelated objectives across equity and credit managers and instruments are sought.  

Orientations vary as they seek growth, value, momentum, inflation protection, and/or catalyst-driven events. Some of these investments will track closely to market indices, with a goal to earn or exceed the benchmark return, but with less risk than the benchmark. Other investments will not closely follow a market benchmark, as they seek to offer broad diversification for the aggregate portfolio, while still earning high-risk adjusted returns, while muting general equity market volatility when possible.  

UPMIFA: Uniform Prudent Management of Institutional Funds Act, passed by the Maryland General Assembly in April 2009. These are the statutes under which endowed funds are invested in the state of Maryland. 

UMB: University of Maryland, Baltimore  

UMBF: University of Maryland Baltimore Foundation, Inc. 

USM: University System of Maryland 

USMF: University System of Maryland Foundation 

COMMON TRUST: Common Trust of the University System of Maryland