Endowments come from assets provided by donors, typically to support an institution. Very commonly, endowments support academic institutions. The typical aim of an endowment is to generate stable returns to help fund the institution's operations. In practice, the endowments create a buffer for weaker years, but there's usually some form of continual cash support on a yearly basis.

Most endowments have a long-term investment horizon, however, they can also have competing needs. For example, Harvard's endowments states it has to balance two competing goals, the need to fund the operating budget with a stable and predictable distribution, and the obligation to maintain the long-term value of endowment assets after accounting for inflation.

Typically endowments have a high allocation towards equities and alternative assets, such as private equity. They need some liquidity to fund the operational activities of the institution, and in many cases, the endowments returns are tax exempt.