US Endowments & Waqfs

Endowment Experiences from the United States

Growth Strategies for Emerging Muslim Markets

April 23rd, 2012

Presented by: Rafi-uddin Shikoh

advisory.dinarstandard.com

2 © 2011 DinarStandard, Strategy Insights, Inc.

Outline

1. Conventional Endowments in US relative to Waqfs

2. Conventional Endowments in the US

3. Conventional Foundations in the US

4. American Muslim Community Waqf Trends & Challenges

Endowments: Experiences from the USA


Definitions

Endowments: A financial asset donation made to a non-profit group or institution in the form of

investment funds or other property that has a stated purpose at the bequest of the donor. Most

endowments are designed to keep the principal amount intact while using the investment income

for charitable efforts.1

Endowments in US relative to Waqfs

Source: 1) Investopedia 2) Referenced: K. Rizwan Kadir: Endowments Foster Strength, Islamic Horizon, March 2012

Awqaf Dedicated Endowments

(i.e academic, cultural, religious)

Foundations Support mix of public institutions through e.g.. grants

Trusts Typically manage family interests

Endowment distinctions in US 2

The Uniform Prudent Management of Institutional Funds Act

(UPMIFA) provides guidelines


Outline

1. Endowments in US relative to Waqfs

2. Endowments in the US

3. Foundations in the US




Endowments at the heart of the US Higher education system

1862 Land Grant Act was historic for education endowments in US

Proceeds from the sale of

these lands were to be

invested in a perpetual

endowment fund which

would provide support for

colleges of agriculture and

mechanical arts in each of

the states.

73 land-grant universities in

the US.*

Morrill Act of 1862 established the Land Grant university system.

Source: Land Grant 150 - University of Minnesota document


Colleges & University Endowments in the US SNAPSHOT

1.6 Avg. Full-time employees to

manage endowments

$408.1 billion Total assets 2011*

64 basis pts average, to manage their

funds in FY2011

46% Institutions reporting

increase in donations ‘11

4.6% Avg. annual effective

spending rate

Source: 2011 NACUBO-Commonfund Study of Endowments. (National Association of College and

University Business Officers); * Based on data from 823 US colleges & universities


Colleges & University Endowments in the US 2011

Rank Institution

2011 Endowment

Funds (bill)

1 Harvard $ 31.7

2 Yale $ 19.3

3 University of Texas System $ 17.1

4 Princeton $ 17.1

5 Stanford $ 16.5

6 MIT $ 9.7

7 University of Michigan $ 7.8

8 Columbia $ 7.7

9 Northwestern $ 7.1

10 Texas A&M University System $ 6.9


University Business Officers)

% Change* in Endowment Market

Value from FY 2010 to FY 2011

* Note: % change does NOT represent the rate of return for the institution’s investments. Rather, the

percentage change in the market value of an endowment from FY 2010 to FY 2011

Assets continue to increase from 2010 to 2011 after post-financial crisis recovery


Colleges & University Endowments in the US SNAPSHOT - Performance

Alternative strategies are key: June 30, 2011 dollar-weighted asset allocation: (although

stark variance in terms of small versus large funds)

Improved Financial Returns*:

• Avg. 19.2% - 2011 fy (net of fee and

expenses; S&P 500 - 30.7%

• Avg. 11.9 % - 2010 fy

• Avg. -18.7% - 2009 fy

Fund size matters:

• Highest average return, 20.1 percent, came

from institutions with assets over $1 billion

• Lowest, 17.6 percent, came from those with

assets under $25 million.


University Business Officers) * Based on data from 823 US colleges & universities

December 2005, $20 million dollar gift for a Center renamed the Prince Alwaleed Bin

Talal Center for Muslim-Christian Understanding (ACMCU). This endowed fund was

the second largest single gift in Georgetown University history

Also, $20 million to Harvard to establish a university-wide program in Islamic studies,

was one of the 25 largest in the university's history


Colleges & University Endowments in the US Islamic Endowments


Outline







Foundations & Trusts in the US The “Giving Pledge”

Bill Gates, Melinda Gates, and Warren

Buffett have a combined net worth of

around $100 billion -- have already

committed most of their money to

charity.

They have asked USA’s billionaires to

pledge to give at least half their net

worth to charity, in their lifetimes or at

death.

81 of America’s wealthiest

individuals and families have

signed onto the Giving Pledge that

now includes Facebook’s Mark

Zuckerberg; CNN’s Ted Turner;

eBays Pierre Omidyar


Foundations & Trusts in the US SNAPSHOT

76,000 Grant making

foundations

$618 billion Total assets

in 2010

$45.7 billion Estimated giving by

all foundations

in 2010

4.7% Est. increase in foundation

assets between ’09-’10

-0.2 percent Estimated change in giving

between 2009 and 2010

Source: 2011 The Foundation Center / Foundation Growth and Giving Estimates, 2011 Edition


Foundations & Trusts in the US 2011

Source: 2011 The Foundation Center / Foundation Growth and Giving Estimates, 2011 Edition

* By giving

% Change in

Assets ‘08-‘09 Foundation

Assets

'09 (bill)

Bill & Melinda Gates Foundation $ 33.9

Ford Foundation $ 10.7

J. Paul Getty Trust $ 9.3

Robert Wood Johnson Foundation $ 8.4

W.K. Kellogg Foundation $ 7.2

William and Flora Hewlett Foundation $ 6.8

David and Lucile Packard Foundation $ 6.7

John D. and Catherine T. MacArthur F.. $ 5.2

Gordon and Betty Moore Foundation $ 5.2

Lilly Endowment $ 5.1

Total Giving '09

(bill)

$ 3.00

$ 0.47

$ 0.35

$ 0.27

$ 0.34

$ 0.28

$ 0.29

$ 0.28

% Change in

Giving ’08-’09

Assets increased 13% among the top 25 foundations

by assets in ‘09; the median change in assets was 13%

Giving increased 12% among top

25* in ‘09; med change was 14.%


Foundations & Trusts in the US SNAPSHOT

New York reported the largest

amounts of foundation giving

and assets overall, followed

closely by California

All four regions showed asset gains, with

the Northeast registering the largest

increase in assets. Thirty states plus the

District of Columbia posted a decrease in

foundation giving in 2009


Outline







American Muslim Demographic Background

Young, middle-class, diverse, majority 1st generation immigrants

Young

Middle-Class

Diverse

Majority 1st

generation

immigrants

State

Est. Muslim

Popn. (2010)

California 1,180,205

New York 920,847

Texas 597,459

Illinois 508,093

New Jersey 487,423

Michigan 313,114

Pennsylvania 301,809

Maryland 228,633

Virginia 221,788

Georgia 191,816


American Muslim Demographic Background

Diverse and geographically distributed

south asian

american


Opportunity for Waqfs in US

Mosques/ Muslim Community Centers: Necessity driving need for Waqfs

• 2,106 mosques in 2011

• 1,209 mosques in 2000

• 74% increase from 2000

• Mosque expansion/ ‘Community

Centers’ -- growing demand


Opportunity for Waqfs in US

Islamic Schools: Necessity driving need for Waqfs

• Islamic schools in the US have

increased by 25% since 2006

• Approximately 350+ Islamic

schools, 40,000 students are

enrolled in the United States

• Demand high for quality Islamic

school to serve growing

numbers of Muslim children

• Community funded, struggle

with finances. Mostly manage

through fees + donations

• E.g.. School, 300+ fee paying

children, financially challenged,

Candidate for Waqf protection/

support

Example: Darul Arqam (DAA) School, New Jersey


A US Based Waqf

The North American Islamic Trust (NAIT)

• Established in 1973, NAIT is a waqf serving Muslims in the United States. Partner of ISNA

(Islamic Society of North America) largest American Muslim organization

• Services:

1. Waqf protection to properties of Islamic Centers. Holds titles to approximately 300

properties

2. Facilitates limited interest-free loans from its Islamic Centers Cooperative Fund

(ICCF)

3. Provides Islamic investing options to the community through a sharia-compliant

mutual fund. The Iman Fund (IMANX) is a no-load mutual fund offered by Allied

Asset Advisors, a subsidiary of NAIT. ($39.5 million net assets)


US Waqf Challenges & Opportunity Example

Minnesota Education Trust (dba Minnesota Waqf)

• A Waqf, MET is based in Minnesota, set up by the regional Muslim American

Society (MAS) chapter but serving as an independent partner entity. ($5 million in

property assets)

• Successes:

• Tarek ibn Ziyad Academy case

• Duluth mosque community

• Investment property purchase for local Masjid

• Challenges:

• Increasing asset protection of Muslim projects needed

• Concept of Waqf not understood by community (title transfer)

• Lack of Sharia compliant capital access


Key Lessons



3. American Muslim

Community Waqf Trends

& Challenges


• Sophistication of investment

practices; size profile/ asset

allocation; operational efficiency

• Role of types of Foundations (e.g.

Corporate, Community);

operational efficiency; Investment

practices; Areas of long-term

development focus

• American Muslim Community

growing needs and challenges and

some emerging creative solutions

R E S E A R C H & A D V I S O R Y

Growth Strategies for Emerging Muslim Markets

Muslim

Lifestyle

Market

Islamic Finance

OIC

Industries

80 Broad Street, 5th Floor, New York City, NY 10004, USA advisory.dinarstandard.com

Analyst Network:

New York, Istanbul, Kuala Lumpur, Dubai

US Endowments & Waqfs

Documents

Transcript of US Endowments & Waqfs