What is an 'endowment fund' in the context of wealth management?

An endowment fund in the context of wealth management is primarily established to support specific causes, such as educational institutions, charities, or cultural organizations, and is managed to exist in perpetuity. This means that the fund is designed to be a permanent source of financial support, where the principal amount is typically kept intact while the investment income generated is used to fund ongoing operations or directed towards specific projects or initiatives aligned with the donor’s intentions.

These funds are often created to ensure long-term sustainability for non-profit organizations. By only spending the income generated from the endowment, organizations can provide reliable funding over time, thus protecting the principal and allowing the fund to grow. In essence, the purpose of an endowment fund is to create a lasting legacy, making it an essential tool within wealth management strategies aimed at philanthropy and institutional financial health.

The other choices, while related to different types of funds, do not accurately capture the essential purpose and function of an endowment fund in wealth management.