City told to develop policies on endowment
Universities in the United States have hoarded billions of dollars to finance their operations for years to come and in Britain the government is offering incentives to encourage schools to do the same. But in Asia, endowment funds are few and poorly funded, a difference that could leave our institutions trailing those in the west.
Hong Kong has many wealthy, generous donors, allowing our institutions to raise millions of dollars in donations every year. However, many of these gifts are spent on erecting new buildings or paying scholarships, which leaves fund raisers passing the hat again year after year instead of building a fund to serve longer-term needs.
An endowment is a gift of money with laws strictly preventing the spending of the principal amount. Gifts to an endowment are often made at the end of one's life to leave a legacy. The money is invested, and the proceeds from those investments can be used to finance a specific programme or mandate.
'Institutions in Asia are behind the rest of the world on endowments,' said John Peralta, the managing director of consulting firm Global Philanthropic. 'This is money that you don't have to ask donors for every year or go to the government for. That is how you can hire the best professors, researchers and this is what helps make Harvard what it is.'
While institutions here may have large cash reserves, this is not protected capital and does not finance the long-term planning that income from an endowment enables.