What differentiates an endowment fund from other investment funds?

An endowment fund is fundamentally established to provide a source of income that supports a specific cause, often for educational institutions, hospitals, or charitable organizations. The core objective of an endowment is to maintain and grow its capital over time while generating a sustainable income stream through investment returns. This income is typically allocated to support ongoing operational expenses, scholarships, or various initiatives prescribed by the fund's purpose.

The unique characteristic of endowment funds lies in their long-term investment strategy, which contrasts significantly with other types of investment funds that may focus primarily on capital appreciation or liquidity. While it is possible for endowment funds to invest in various asset classes, including equities, fixed income, and alternatives, their primary distinction lies in their mission to provide continuous financial support, rather than pure profit generation or short-term gains.