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Endowment Payout Process Tutorial 4: Understanding Share Value Other Available Tutorials: 1. Fiscal Year 2014 Endowment Payout Process Change 2. Basic.

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Presentation on theme: "Endowment Payout Process Tutorial 4: Understanding Share Value Other Available Tutorials: 1. Fiscal Year 2014 Endowment Payout Process Change 2. Basic."— Presentation transcript:

1 Endowment Payout Process Tutorial 4: Understanding Share Value Other Available Tutorials: 1. Fiscal Year 2014 Endowment Payout Process Change 2. Basic Mechanics of Endowment Payout Process 3. Commonly Used Endowment Related Reports Recorded July 2013

2 Confidential Stanford University Confidential Stanford University  Stanford’s primary investment pool is the Merged Pool (MP). Endowment funds are invested in the MP through the purchase of shares.  At any point in time, the MP has a total market value and a number of shares.  Share value = Market value / number of shares  Stanford calculates share value at two points in time every month. What is Share Value?

3 Confidential Stanford University Confidential Stanford University Ending Share Value is known for a given month following month-end close, mid-way into the following month. Includes impact of: Market appreciation/ depreciation (i.e., performance) Actual earnings – cash earned by MP investments Payout made during the month Needed for accounting related tasks What was the market value of a fund’s investment at the end of a prior month? Reported on financial statements Used to evaluate Payout Resources for the current month’s payout. Ending Share Value 3

4 Confidential Stanford University Confidential Stanford University  Once Ending Share Value is known for the prior month, an Interim Share Value is immediately calculated as follows:  Interim Share Value Calculation = prior month Ending Share Value minus current month payout per share  The Interim Share Value always represents current Market Value and is used for transactions because it includes the impact of payout on share value. Interim Share Value 4

5 Confidential Stanford University Confidential Stanford University 5Financial Management Services Interim Share Value for New Gifts Prior month share value = $300 1,000 X $299 MV =$299,000 $1K Payout New Gift: $100K In current month, share value declines by $1 to cover payout Ending Month Share Value – Current Month Payout /Share = “Interim Share Value” New shares must be purchased at $299 since they did not benefit in that month’s payout Buys Shares at $299 1,000 X $300 MV=$300,000 September 1,334.5 X $299 MV =$399,000 Interim Share Value October

6 Confidential Stanford University Confidential Stanford University  Interim Share Value is used for all transactions because:  Payout is made based on shares held on the first of the month (prior to any transactions for that month).  Shares purchased with new gifts do not generate payout in the month of investment (and therefore buy into the Merged Pool using the “after payout” Interim Share Value).  Withdrawn shares do generate payout in the month they are withdrawn (and so are valued at the “after payout” price)  Transactions in/for a current month always occur after the current month Interim Share Value has been calculated. Interim Share Value Used for All Transactions 6

7 Confidential Stanford University Confidential Stanford University  RM3 Endowment Reports  123 Endowment Display  128 Endow Investment  Ending and Interim Share Values updated ~15 th of every month  Ending share value for last closed month (and all prior months)  Interim share value for current market value and transactions  Reports display “Ending” and “Interim” in header – explanation in footnote  See Fingate for report examples Share Value on Reports

8 End of Tutorial 4: Understanding Share Value Other Available Tutorials: 1. Endowment Payout Process Changes for FY14 2. Basic Mechanics of Endowment Payout Process 3. Commonly Used Endowment Related Reports


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