Explaining University Endowments
Submitted Photo
Cathy Zaharis (center) poses with her parents, Leona and George, after graduating from the University of Iowa in 1982. Zaharis says her parents were integral in helping her find success in life, and that's why she's created two endowed scholarships at Iowa.
Cathy Zaharis (82BBA) credits her parents for so much of what she’s accomplished in life.
“I’ve always felt fortunate, because my parents paid for my college degree,” says Zaharis, who is retired from a career at Principal Global Investors and the University of Iowa Henry B. Tippie College of Business. “They allowed me to get a great education and go onto a successful career.”
That’s, in part, why Zaharis created two endowed scholarships at Iowa.
“I wanted to honor my parents, give back, and pay it forward,” she said. “One scholarship is for medical students, because my dad did his residency at Iowa. My mom loved to travel and see the world, so I created a scholarship so that other students can pursue international travel.”
These endowed scholarships are part of the University of Iowa Center for Advancement’s endowment pool, which provides resources to the university to help lower tuition, advance research efforts, create a stronger Hawkeye State, and more. However, in recent years, university endowments have faced increased scrutiny as inflationary tuition increases have outpaced additional state funding and resulted in higher costs for students and their families.
Here’s an in-depth look at how university endowment funds work.
What is an endowment fund?
An endowment is made up of charitable donations from multiple donors that are invested to produce steady and reliable income. The original investment—or principal—isn’t touched, while the income earned is distributed to areas on campus according to the wishes of the donor.
The UI Center for Advancement’s endowment is made up of more than 3,000 unique donor funds that have been created by alumni and friends. These resources are designed to last indefinitely, enabling Hawkeyes to make a lasting impact on a cause they value.
“Fundamentally, a university endowment is a perpetual pool of capital that individuals donate to support the campus at large or provide funding for specific functions, programs, or areas within the university,” says Daniel Gottlieb, chief investment officer for the University of Iowa Center for Advancement. “We invest the donated money on a long-term basis so that we can distribute capital every year to support Iowa.”
While the UI Center for Advancement endowment fund is approximately $2.1 billion, there are two additional endowment funds on campus—the University of Iowa endowment, which is largely made up of donations received prior to the UI Center for Advancement’s inception, and an endowment that was created from a 2020 public-private partnership for the operation and improvement of the university’s utility system.
As of July 2026, the three endowments totaled $4.08 billion.
UI Center for Advancement Endowment as of June 30, 2026
What is an endowment, and how does it support campus?
Endowment funds touch nearly every facet of Iowa’s campus. In fiscal year 2025–26, the UI Center for Advancement provided more than $195 million to areas on campus—$65 million of which was generated from endowment fund earnings. These funds went to all 12 colleges on campus and other areas such as the UI Department of Intercollegiate Athletics, UI Health Care, and more.
“The actual number we provide to campus changes from year to year—balancing inflation with our ability to ensure consistent funding,” says Gottlieb. “We utilize a banded inflation payout policy, so campus has an idea of what funds they will receive each year.”
Under a banded inflation model, payout for each fiscal year is tied to the U.S. Bureau of Labor Statistics’ Consumer Price Index—or otherwise known as the inflation rate—at the end of the previous calendar year. The bands—4 percent minimum and 6 percent maximum—keep spending steady during market fluctuations.
Once the calendar-year inflation rates are announced, the UI Center for Advancement can determine the dollar amount that will be distributed for the next fiscal year. This provides colleges and departments with an idea of how to budget for the future.
Endowed and Non-Endowed Funding to Campus for Fiscal Years 2022–26
Why can’t Iowa use its endowment to further reduce tuition or cover additional costs?
It’s a common misconception that endowment funds can be used like an ATM or bank account. At Iowa, there are several reasons why it does not spend down its endowment.
- Donor intent—Most of Iowa’s endowment has specific purposes—set by the donor—as to how those funds are used, and the UI Center for Advancement has a legal duty to honor those restrictions. For instance, Zaharis gave funds to create endowed scholarships for medical students and to study abroad, and those funds can only be used for those purposes.
- Fiduciary responsibilities—Iowa is one of 49 states that follow the Uniform Prudent Management of Institutional Funds Act, which guides investment decisions and endowment fund expenditures for nonprofits. This act limits how much of the income earned from endowments is spent on operations.
- Liquidity concerns—Whether it’s real estate or private equity, endowment funds may be tied up in investments that aren’t easily or quickly accessible. The UI Center for Advancement has approximately 110 separate investment funds—largely mutual funds and private equity stakes—that invest in areas such as biotechnology companies, hotels, music royalties, and much more.
- Intergenerational equity—The goal of a perpetual endowment is to provide opportunities for members of the UI community—both now and into the future. The amount of payout is chosen specifically to treat each generation equitably.
How are investment decisions made for Iowa’s endowment fund?
Gottlieb leads a team of five individuals who are dedicated to this work. Unlike some of the largest university endowments—which may use a specialist model and focus on one asset class per team member—the UI Center for Advancement follows a different model.
“We have a small team, so we utilize a generalist model,” says Gottlieb. “When everyone looks at all the asset classes available, we can realize value more easily to build a better portfolio.”
His team monitors, researches, and underwrites new opportunities. To pursue a new investment opportunity, it can take as little as a month to go from interest to investor—but it can take many months for something to come to fruition.
Zaharis is on the UI Center for Advancement Board of Directors Investment Committee, and once an opportunity arises, she and her counterparts have five days to approve or deny the investment opportunity.
“I think about three major things when looking at investments for the endowment,” says Zaharis. “I want it to grow—that’s the main goal. But I also want to find opportunities where we can have growth while being able to have stability and current income.”
After getting approval from the investment committee, Gottlieb and his team perform a legal review with outside counsel and then an operational due diligence review. If those steps all go smoothly, the UI Center for Advancement will invest.
What is an endowment tax, and how would it impact the University of Iowa?
In 2017, the Tax Cuts and Jobs Act created a new tax on some of the largest private nonprofit college and university endowments around the country. If an institution enrolled at least 500 students and had assets in excess of $500,000 per student, they were required to pay a 1.4 percent tax on their net investment income.
In 2025, the omnibus tax and spending bill passed by the U.S. Congress created two additional tiers and raised the tax rate for some private institutions to as high as 8 percent on their net investment income.
“If Iowa was forced to pay an endowment tax, it would be incredibly difficult for us to maintain the payout that we have to support programs on campus while growing the endowment over time,” says Gottlieb. “Most likely, after inflation, the endowment would actually be shrinking.”
To date, no public institutions—including Iowa—have been impacted by endowment taxes at the state or federal level.
What is an endowment, and how does it benefit alumni and friends?
Creating an endowment fund at the UI Center for Advancement provides donors with an immediate tax benefit. It also means the individual’s financial contributions will last in perpetuity.
Learn more about how you can create your own endowed fund.
