Development 101. April 1, Presentation by: John P. Rush Vice President for Development and Alumni

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1 Development 101 April 1, 2010 Presentation by: John P. Rush Vice President for Development and Alumni 1

2 Loyalty. Pride. Passion. 2

3 Goal $100 million; Total Raised Nearly $34 million January 1, 2009 December 31, 2012 The MSU Foundation and MSU Athletic Department have developed a matching gift program to support StatePride. StatePride will raise funds for scholarships and faculty support. Priority will be given to scholarships geared towards recruitment purposes. To retain expert faculty members, MSU will need to increase compensation and funds for research opportunities. 3

4 (in millions) Ag & Life Sciences $23.4 $34.4 A&S $13.5 $25.2 Architecture, Art, & Design $13.0 $15.0 COBI $34.4 $56.9 Education $8.7 $15.1 Engineering $75.5 $86.5 Forest Resources $10.8 $14.8 Vet Medicine $19.7 $25.3 Athletics $48.0 $78.4 Library $1.6 $10.1 Meridian $3.0 $17.8 Actual Target Gifts for Research $26.8 $31.0 Other University Needs $49.4 $62.0 Student Affairs $32.7 $29.2 $0.0 $10.0 $20.0 $30.0 $40.0 $50.0 $60.0 $70.0 $80.0 $90.0 $

5 $90.0 $80.0 $70.0 $60.0 $50.0 $40.0 $30.0 $20.0 $10.0 $0.0 $78.6 $74.4 $61.5 $55.8 $56.8 $51.0 $51.6 $44.1 $46.1 $40.5 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 5

6 History of Philanthropy in the U.S. and in Higher Education Annual Fund Major Gifts Planned and Deferred Gifts Stewardship Asset Management Foundations that Support Higher Education 6

7 Philanthropy from Greek Love of Mankind Unique to the United States Harvard University Alumni Associations and Fundraising State Universities/Private Universities Today s Climate 7

8 A GIFT is a tangible symbol of feelings between people. A DONATION is a tangible symbol of support to a cause. 8

9 Frequently given/asked Discretionary income May be unrestricted funds Mailings, events, phone, electronic 2-5% of income Expensive to operate 90% gifts; 10% dollars 1st step to major gift Very, very important 9

10 Infrequently given/asked From assets: stop/think Relationship required (People key) Targeted/restricted projects 10-20x annual fund gift 10% gifts; 90% dollars Often repeated over time Critical to success 10

11 For each major gift (>$25K), you need three prospective major givers On average, a major gift is closed after 9 meaningful contacts, or between 6 months and 2 years Thus, to get 5 new major gifts requires 3 x 9 x 5 = 135 meaningful contacts 11

12 Once in a lifetime gift Combination of giving methods; many people involved Total commitment to institution s mission Long, emotional relationship (and several previous major gifts) Often involves major naming opportunity 1,000-2,000x annual gift; 10-20% net incoming-producing assets 12

13 Belief in mission and stability of the organization Sense of civic responsibility High regard for staff and volunteer leadership 13

14 Guilt and obligation Promotional materials and proposals Tax considerations 14

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17 What is the difference? All deferred gifts are planned gifts, but not vice versa. The role of planned giving in major gift work 17

18 Cash Securities Real Estate Family Corporate Stock Bargain Sale Charitable Deduction Limits 18

19 Gifts through a will (Bequest) Living Trust Retirement Plan Assets 19

20 Charitable Remainder Trusts Charitable Remainder Annuity Trusts (CRAT) Charitable Remainder Unitrusts (CRUT) Charitable Gift Annuities Charitable Lead Trusts Life Estate Contracts 20

21 Initial Contact Identification Additional interest Show Creativity Creating the Joyful Giver Invoking the Grateful Recipient Attention Interest Desire Maybe Action Yes Making the Artful Ask Acknowledge NO 21

22 Key in nurturing and building of lasting relationships between the charitable organization and those who support it with their wealth, wisdom, and work. As an active advocate of donor interests throughout the organization, donor stewardship fosters and encourages such support by: Acknowledging any and all contributions in a timely, accurate, and appropriate manner; Recognizing donors in meaningful ways that faithfully adhere to any stated wishes regarding anonymity and other levels of public disclosure; and Reporting to donors in a consistent and accurate manner on the use, impact, and management of their financial contributions. 22

23 Acknowledgements Thank you letters sent by various individuals Recognition Permanent recognition such as: Donor walls, program funding, endowed chairs, other select naming opportunities Donor recognition events Donor clubs 23

24 Reporting o Tax receipt IRS requires a receipt for contributions of $250 or more. Some organizations receipt all levels of gifts. o Annual stewardship (endowment) reports o Report scholarship recipients 24

25 As of December 31, 2009, the Mississippi State Investment Pool managed about $227 million in endowed assets through its nineteen money managers. The MSU Foundation s Investment Committee establishes investment policy (including the asset mix), and selects and evaluates managers. The Foundation retains the Fund Evaluation Group of Cincinnati, Ohio, as its investment consultant. The portfolio is constructed to maximize total return, while minimizing volatility. 25

26 The Foundation makes no attempt to time the market. In the long term, the total portfolio return should equal or exceed spending plus inflation. Long-term Hurdle Rate 4% Spending Rate + 1% Annual Mgt Fee + 3% Inflation Rate = 8% Minimum Acceptable LT Return 26

27 MSU Foundation MSU Alumni Foundation MSU Athletics MSU 82% 5% 3% 10% Total Value of Pool: ~$227 million as of December 31,

28 25.0% 22.9% 20.0% 15.0% 10.0% 5.0% 4.4% 3.1% 0.0% -5.0% -0.1% 1 Year 3 Years 5 Years 10 Years 28

29 30.0% 20.0% 10.0% 27.1% 9.1% 8.3% 14.4% 7.1% 22.9% 0.0% -10.0% -20.0% -2.7% -6.6% -13.3% -30.0% -25.0%

30 -10.0% -5.0% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% Alabama Arkansas Auburn Florida Georgia Georgie (ARCH) Kentucky LSU Mississippi Mississippi State South Carolina Tennessee Average -1.3% -1.3% -3.6% -0.9% -3.6% -0.3% -0.1% -3.3% -4.1% -1.6% 0.6% 0.1% 11.6% 16.5% 17.4% 24.1% 25.6% 22.4% 24.3% 25.8% 22.9% 28.3% 21.0% 21.8% One-Year Three-Year 30

31 100% 75% 35% Hedge Funds (Abs/Directional)..20% Natural Resources 7% Private Equity/Venture Capital..3% Real Estate.5% 50% 25% 0% 18% 18% 29% Domestic Stocks Fixed Income Global Fixed Income Domestic Large/Mid Cap..17% Domestic Small Cap. 12% International Stocks Alternatives 31

32 Why not simply spend what is earned? Two scenarios over a 10-year period Endowment #1 - $100,000 earns average of 8% per year and pays out all earnings, inflation 3% Endowment #2 - $100,000 earns average of 8% per year, spends 4% and reinvests 4%, inflation 3% Endowment #1has market value of $100,000 at end of ten years, but inflation has eroded purchasing power to equivalent of $73,742 Endowment #2 has purchasing power of $110,462 32

33 History and Purpose 1. Keeps public and private funds separate 2. Keeps public and private records separate 3. Greater flexibility 4. Opportunity to involve high-level volunteers in university life 33

34 Governance Models Independent Dependent Interdependent (most common) Funding Models Direct Support From Host Institution Unrestricted Gifts Fees Some combination of above (most common) 34

35 Relationship with Host Institution Memorandum of Understanding Critical Interaction with Governing Board Remaining vital 1. Fundraising performance 2. Investment performance 3. Being responsive 4. Being accountable 35

36 ank you! 36