AEFFSF
On Monday morning, Jan Abbeshire was
looking over one of the first presentations her team gave to Coach Robert Siena
regarding the Alan Edgewater Failure First Scholarship Fund. Alan was
comfortable with Coach Siena’s decision to let Jan’s firm take the lead on
managing this program even though they has no experience in such matters.
Still, if Siena wanted to made this grand gesture and commit nearly $4.4
million to assure the foundation would last 100 years, she was confident that
she could get a suitable team to manage the fund and disbursements. Laurie Ripp
was part of the team along with a boutique investment firm.
She still couldn’t believe the coach
entrusted Abbeshire & Bluestone on an ongoing basis with such a
responsibility. As a consequence, she insisted on accountability and
transparency over and above generally accepted practice. Part of that policy
was to clearly spell out all fees including publicity and marketing expenses.
Portfolio Return
|
8%
|
||||
Tuition Growth/year
|
4%
|
||||
Base Tuition/year
|
$ 50,000
|
||||
Tuition
|
Discount
|
PV
|
|||
Year
|
(per year)
|
Funding
|
Factor
|
Cash Flow
|
PV SUM
|
1
|
50,000
|
50,000
|
0.925926
|
46,296.30
|
46,296.30
|
2
|
52,000
|
102,000
|
0.857339
|
87,448.56
|
133,744.86
|
3
|
54,080
|
156,080
|
0.793832
|
123,901.34
|
257,646.19
|
4
|
56,243
|
212,323
|
0.73503
|
156,063.89
|
413,710.08
|
5
|
58,493
|
220,816
|
0.680583
|
150,283.75
|
563,993.83
|
6
|
60,833
|
229,649
|
0.63017
|
144,717.68
|
708,711.51
|
7
|
63,266
|
238,835
|
0.58349
|
139,357.77
|
848,069.28
|
8
|
65,797
|
248,388
|
0.540269
|
134,196.37
|
982,265.65
|
9
|
68,428
|
258,324
|
0.500249
|
129,226.13
|
1,111,491.78
|
10
|
71,166
|
268,657
|
0.463193
|
124,439.98
|
1,235,931.76
|
11
|
74,012
|
279,403
|
0.428883
|
119,831.09
|
1,355,762.85
|
12
|
76,973
|
290,579
|
0.397114
|
115,392.90
|
1,471,155.75
|
13
|
80,052
|
302,202
|
0.367698
|
111,119.09
|
1,582,274.85
|
14
|
83,254
|
314,290
|
0.340461
|
107,003.57
|
1,689,278.42
|
15
|
86,584
|
326,862
|
0.315242
|
103,040.47
|
1,792,318.89
|
16
|
90,047
|
339,936
|
0.29189
|
99,224.16
|
1,891,543.05
|
17
|
93,649
|
353,534
|
0.270269
|
95,549.19
|
1,987,092.24
|
18
|
97,395
|
367,675
|
0.250249
|
92,010.33
|
2,079,102.58
|
19
|
101,291
|
382,382
|
0.231712
|
88,602.54
|
2,167,705.12
|
20
|
105,342
|
397,677
|
0.214548
|
85,320.97
|
2,253,026.09
|
21
|
109,556
|
413,584
|
0.198656
|
82,160.93
|
2,335,187.02
|
22
|
113,938
|
430,128
|
0.183941
|
79,117.93
|
2,414,304.95
|
23
|
118,496
|
447,333
|
0.170315
|
76,187.64
|
2,490,492.59
|
24
|
123,236
|
465,226
|
0.157699
|
73,365.88
|
2,563,858.47
|
25
|
128,165
|
483,835
|
0.146018
|
70,648.62
|
2,634,507.09
|
26
|
133,292
|
503,189
|
0.135202
|
68,032.01
|
2,702,539.09
|
27
|
138,623
|
523,316
|
0.125187
|
65,512.30
|
2,768,051.40
|
28
|
144,168
|
544,249
|
0.115914
|
63,085.92
|
2,831,137.32
|
29
|
149,935
|
566,019
|
0.107328
|
60,749.40
|
2,891,886.72
|
30
|
155,933
|
588,660
|
0.099377
|
58,499.43
|
2,950,386.15
|
31
|
162,170
|
612,206
|
0.092016
|
56,332.78
|
3,006,718.93
|
32
|
168,657
|
636,694
|
0.0852
|
54,246.38
|
3,060,965.31
|
33
|
175,403
|
662,162
|
0.078889
|
52,237.26
|
3,113,202.57
|
34
|
182,419
|
688,649
|
0.073045
|
50,302.54
|
3,163,505.11
|
35
|
189,716
|
716,194
|
0.067635
|
48,439.49
|
3,211,944.59
|
36
|
197,304
|
744,842
|
0.062625
|
46,645.43
|
3,258,590.03
|
37
|
205,197
|
774,636
|
0.057986
|
44,917.82
|
3,303,507.85
|
38
|
213,404
|
805,621
|
0.05369
|
43,254.20
|
3,346,762.05
|
39
|
221,941
|
837,846
|
0.049713
|
41,652.19
|
3,388,414.24
|
40
|
230,818
|
871,360
|
0.046031
|
40,109.52
|
3,428,523.76
|
41
|
240,051
|
906,214
|
0.042621
|
38,623.98
|
3,467,147.74
|
42
|
249,653
|
942,463
|
0.039464
|
37,193.46
|
3,504,341.20
|
43
|
259,639
|
980,162
|
0.036541
|
35,815.93
|
3,540,157.13
|
44
|
270,025
|
1,019,368
|
0.033834
|
34,489.41
|
3,574,646.54
|
45
|
280,826
|
1,060,143
|
0.031328
|
33,212.03
|
3,607,858.57
|
46
|
292,059
|
1,102,548
|
0.029007
|
31,981.95
|
3,639,840.52
|
47
|
303,741
|
1,146,650
|
0.026859
|
30,797.43
|
3,670,637.95
|
48
|
315,891
|
1,192,516
|
0.024869
|
29,656.79
|
3,700,294.74
|
49
|
328,526
|
1,240,217
|
0.023027
|
28,558.39
|
3,728,853.13
|
50
|
341,667
|
1,289,826
|
0.021321
|
27,500.67
|
3,756,353.80
|
51
|
355,334
|
1,341,419
|
0.019742
|
26,482.13
|
3,782,835.93
|
52
|
369,548
|
1,395,076
|
0.01828
|
25,501.31
|
3,808,337.23
|
53
|
384,329
|
1,450,879
|
0.016925
|
24,556.81
|
3,832,894.05
|
54
|
399,703
|
1,508,914
|
0.015672
|
23,647.30
|
3,856,541.35
|
55
|
415,691
|
1,569,270
|
0.014511
|
22,771.48
|
3,879,312.83
|
56
|
432,318
|
1,632,041
|
0.013436
|
21,928.09
|
3,901,240.92
|
57
|
449,611
|
1,697,323
|
0.012441
|
21,115.94
|
3,922,356.86
|
58
|
467,596
|
1,765,216
|
0.011519
|
20,333.87
|
3,942,690.72
|
59
|
486,299
|
1,835,824
|
0.010666
|
19,580.76
|
3,962,271.48
|
60
|
505,751
|
1,909,257
|
0.009876
|
18,855.55
|
3,981,127.03
|
61
|
525,981
|
1,985,628
|
0.009144
|
18,157.19
|
3,999,284.22
|
62
|
547,021
|
2,065,053
|
0.008467
|
17,484.70
|
4,016,768.92
|
63
|
568,901
|
2,147,655
|
0.00784
|
16,837.12
|
4,033,606.05
|
64
|
591,658
|
2,233,561
|
0.007259
|
16,213.53
|
4,049,819.57
|
65
|
615,324
|
2,322,903
|
0.006721
|
15,613.02
|
4,065,432.60
|
66
|
639,937
|
2,415,820
|
0.006223
|
15,034.76
|
4,080,467.36
|
67
|
665,534
|
2,512,452
|
0.005762
|
14,477.92
|
4,094,945.28
|
68
|
692,156
|
2,612,950
|
0.005336
|
13,941.70
|
4,108,886.98
|
69
|
719,842
|
2,717,468
|
0.00494
|
13,425.34
|
4,122,312.33
|
70
|
748,635
|
2,826,167
|
0.004574
|
12,928.11
|
4,135,240.43
|
71
|
778,581
|
2,939,214
|
0.004236
|
12,449.29
|
4,147,689.72
|
72
|
809,724
|
3,056,782
|
0.003922
|
11,988.20
|
4,159,677.93
|
73
|
842,113
|
3,179,054
|
0.003631
|
11,544.20
|
4,171,222.12
|
74
|
875,798
|
3,306,216
|
0.003362
|
11,116.63
|
4,182,338.76
|
75
|
910,830
|
3,438,464
|
0.003113
|
10,704.91
|
4,193,043.66
|
76
|
947,263
|
3,576,003
|
0.002883
|
10,308.43
|
4,203,352.09
|
77
|
985,153
|
3,719,043
|
0.002669
|
9,926.63
|
4,213,278.73
|
78
|
1,024,559
|
3,867,805
|
0.002471
|
9,558.98
|
4,222,837.71
|
79
|
1,065,542
|
4,022,517
|
0.002288
|
9,204.95
|
4,232,042.65
|
80
|
1,108,163
|
4,183,418
|
0.002119
|
8,864.02
|
4,240,906.68
|
81
|
1,152,490
|
4,350,754
|
0.001962
|
8,535.72
|
4,249,442.40
|
82
|
1,198,590
|
4,524,785
|
0.001817
|
8,219.59
|
4,257,661.99
|
83
|
1,246,533
|
4,705,776
|
0.001682
|
7,915.16
|
4,265,577.14
|
84
|
1,296,394
|
4,894,007
|
0.001557
|
7,622.00
|
4,273,199.15
|
85
|
1,348,250
|
5,089,767
|
0.001442
|
7,339.71
|
4,280,538.85
|
86
|
1,402,180
|
5,293,358
|
0.001335
|
7,067.87
|
4,287,606.72
|
87
|
1,458,267
|
5,505,092
|
0.001236
|
6,806.09
|
4,294,412.81
|
88
|
1,516,598
|
5,725,296
|
0.001145
|
6,554.02
|
4,300,966.83
|
89
|
1,577,262
|
5,954,308
|
0.00106
|
6,311.27
|
4,307,278.10
|
90
|
1,640,353
|
6,192,480
|
0.000981
|
6,077.52
|
4,313,355.63
|
91
|
1,705,967
|
6,440,179
|
0.000909
|
5,852.43
|
4,319,208.06
|
92
|
1,774,205
|
6,697,787
|
0.000841
|
5,635.67
|
4,324,843.73
|
93
|
1,845,174
|
6,965,698
|
0.000779
|
5,426.94
|
4,330,270.67
|
94
|
1,918,980
|
7,244,326
|
0.000721
|
5,225.95
|
4,335,496.62
|
95
|
1,995,740
|
7,534,099
|
0.000668
|
5,032.39
|
4,340,529.01
|
96
|
2,075,569
|
7,835,463
|
0.000618
|
4,846.01
|
4,345,375.02
|
97
|
2,158,592
|
8,148,882
|
0.000573
|
4,666.53
|
4,350,041.55
|
98
|
2,244,936
|
8,474,837
|
0.00053
|
4,493.69
|
4,354,535.24
|
99
|
2,334,733
|
8,813,830
|
0.000491
|
4,327.26
|
4,358,862.50
|
100
|
2,428,123
|
9,166,384
|
0.000455
|
4,166.99
|
4,363,029.49
|
This model assumes some level of
tuition growth each year (50k doesn't do it for a full rise these days at a
tier one institution.). Foundations are required to distribute 3% (or maybe 5%)
of assets each year to, so if a student pool in any give year didn't "cost"
3-5% of assets, the foundation would have to find some other way to give the
cash away (maybe some form of one-time grant).
Typically foundations have
indefinite lives. Although Coach Robert Siena may set up a fund while he is
alive, the general idea is that the scholarship program, in his care, would
continue indefinitely. So, we don’t want to limit our thought process to only a
ten year horizon.
If we assume $50K as an average
starting tuition that grows at 4%/year and a portfolio return of 8%, we can sustain
a foundation on $4.4 million for 100 years (assuming 4 years of school for each
recipient). See the "PV SUM" column for the amount you are looking
for based on the life of the foundation (100 years used as a proxy for an
indefinite life).
**The model (attached) is very
sensitive to portfolio return input, base tuition rate, and expense growth.
Jan, in hindsight was impressed that the projections and the plan was supported by the coach with timely funding. Her not for profit experience and connections were a valuable asset to the coach's dream. It added value to Alan Edgewater too. AE was grateful that the fund was so well managed with only a minimal amount of effort required of him
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