Do you know what they are? Endowments?
In this article you will find:
- What is an Endowment Fund?
- Why create a Heritage Fund?
- Equity Funds in Brazil
- Equity Funds for CSOs
- Heritage Funds for families
What is an Endowment Fund?
The Equity Fund, also known as endowment, is a financial instrument that brings together assets intended to serve as a source of income perennial resources for a specific cause or organization. Its main purpose is ensure the sustainability of a socio-environmental cause, protecting assets from operational risks and avoiding the inefficient use of resources.
They are created with the obligation to preserve the main value in perpetuity, so that the capital generate income that support the financial sustainability long term of an organization or cause. These incomes are essential, as they provide continuous resources and predictable to support projects for health, education and combating social inequality over the years, for example.
To ensure the success and longevity of a Heritage Fundl, it is crucial that he has clear rules for the use and application of resources. This requires a model of professional management, besides a solid and transparent governance.
Why create a Heritage Fund?
The motivations for creating a Equity Fund are diverse:
- Perpetuate a cause or family values;
- Establish a specific use for the resources;
- Ensure long-term operational stability;
- Professionalize governance and financial operations.
Equity Funds in Brazil
In Brazil, the Endowments have existed since the mid-1950s, but regulation only came in 2019, through the Law 13.800, which creates a legal framework and recognizes the relevance of funds as instruments for attracting donations by entities, in addition to creating governance parameters for managing institutions.
Main aspects of Law No. 13,800/2019:
- Creation of Management Organizations: the management of equity funds must be carried out by an organization independent of the beneficiary entity;
- Public purpose: funds must support causes of public interest, such as education, science, culture, the environment and health;
- Governance: a robust governance system is mandatory, with boards of directors and supervisory boards and a specialized investment committee.
according to Equity Fund Monitor in Brazil, there are 113 active equity funds in the country, with total assets of more than R$157 billion as of October 2024.
Equity Funds for CSOs
In the Third Sector, the Endowments are fundamental to promoting the financial sustainability of non-profit organizations. Data indicate that almost half of the civil society organizations that were created in the last decade closed their doors due to lack of financial reserves and administrative difficulties.
You endowments allow CSOs to have a continuous and predictable source of resources to finance their projects and ensure the sustainability of their activities. By creating a fund, the organization reduces its dependence on sporadic donations, ensuring a lasting and sustainable impact.
Heritage Funds for families
You equity funds are also an excellent tool for aligning the family heritage to philanthropic values, financing projects that generate positive social and environmental impact.
One of the greatest benefits of family endowments is the ability to specify and vary the causes and/or organizations to be supported over time, ensuring that the legacy of the donor continues to be promoted even after his death. This structure offers security that the donated resources will be used in a manner effective and sustainable over time.
Endowments of Brazil
THE Sitawi Finanças do Bem, in partnership with the Endowments of Brazil, developed a innovative structure for the creation and management of equity funds in the country. Aligned with the Law 13.800, this partnership allows multiple causes to operate their equity funds economically and efficiently, without the need to create a new CNPJ with high standards of compliance.
This approach works like a “coworking” for equity funds, where several institutions share the same infrastructure, reducing costs and increasing efficiency, while each fund remains independent — resources do not mix. Endowments of Brazil offers a simplified process for creating and managing funds, ensuring sustainable financing for projects.
Advantages of creating a Heritage Fund with Endowments do Brasil:
For CSOs
- Reduction of operational and legal costs by up to 80%;
- Expertise in financial management;
- Adherence to Law 13.800/19;
- Recurring resources for executing core/strategic projects;
- Transparency and compliance;
- Security — attractive to donors.
For families:
- Simplicity and convenience in legacy implementation;
- Security, transparency and compliance;
- Expertise in financial management;
- Flexibility in the use of resources for different causes and purposes
- Guarantee of the correct direction of money in the long term;
- Adherence to Law 13.800/19;
- Monitoring redirections and accountability.
If you believe that a endowment fund could be the solution to promote the sustainability of your organization or cause, contact and discover how we can help you build a more sustainable future.
