Endowment Payout Process Tutorial 4: Understanding Share Value Recorded July 2013 Other Available Tutorials: 1. Fiscal Year 2014 Endowment Payout Process Change 2. Basic Mechanics of Endowment Payout Process 3. Commonly Used Endowment Related Reports
What is Share Value? • 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.
Ending Share Value • 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 .
Interim Share Value • 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 alwaysrepresents current Market Value and is used for transactions because it includes the impact of payout on share value.
Interim Share Value for New Gifts New Gift: $100K • Prior month share value = $300 • In current month, share value declines by $1 to cover payout Buys 334.5 Shares at $299 • 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 $1K Payout 1,000 X $299 MV =$299,000 1,334.5 X $299 MV =$399,000 1,000 X $300 MV=$300,000 Interim Share Value September October Financial Management Services
Interim Share Value Used for All Transactions • 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 • Withdrawn shares do generate payout in the month they are withdrawn (and so are valued at the “after payout” price) • Transactions in/for a current month always occur after the current month Interim Share Value has been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.
Share Value on Reports • RM3 Endowment Reports • 123 Endowment Display • 128 Endow Investment • Ending and Interim Share Values updated ~15th 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
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