ASTANA – President of Kazakhstan Kassym-Jomart Tokayev signed the law on targeted capital funds and endowment funds on June 30. The law aims to establish a legal framework for the creation of endowment funds designed to support science and innovation, education, healthcare and social protection of the population through investment income.
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Endowments are financial assets, usually in the form of donations, that are invested to support an institution over the long term. These funds generate annual investment returns that play a vital role in supporting the financial health of the institutions.
“Endowment funds at universities should become a key link in the development of the educational ecosystem,” Tokayev said in his state-of-the-nation address in September 2022.
The newly adopted amendments ensure the safety of the fixed capital of endowment funds, while providing charitable contributions through investment income.
“The need for a separate law related to the lack of clear regulations governing the investment activities of endowment funds, the ownership rights of contributors to targeted capital, and effective risk control over the use of those funds,” said Kazakh Minister of Science and Higher Education Saysat Nurbek at the plenary session of the Mazhilis, a lower chamber of the Kazakh Parliament, in April.
Endowments combine elements of both philanthropy and investment management, particularly given the significant role in supporting long-term financial sustainability.
“The adoption of the law will allow the establishment of endowment funds in any socially significant sectors, including education, healthcare, mass sports, and culture. It is important that the development of endowment funds will foster greater savings within the economy and, consequently, stimulate the inflow of capital to financial markets,” Nurbek said.
What are the advantages of the new law for universities?
The new law opens up a fundamentally new way of sustainable financing of universities, reduces their dependence on the state budget and expands their institutional autonomy.
It also improves academic freedom and the quality of education. Universities gain additional opportunities to finance their strategic objectives through the income of the endowment fund, whether for scholarships, research projects, faculty invitations, or infrastructure development. This reduces administrative barriers and increases the academic autonomy of universities.
The presence of an endowment fund also makes a university more attractive to international students, partners, investors, and rating agencies. This makes Kazakh universities more flexible, high-tech, and entrepreneurially oriented, positioning them to compete effectively within the global higher education landscape.
The new law allows the use of investment income while maintaining the fund’s principal capital. It is supposed that the funds will be managed by professional asset management companies.
The legislation establishes all the necessary legal framework to attract donations and targeted contributions (endowments) from graduates in favor of their universities, engage larger donors, such as companies, foundations, and individuals, and ensure transparency and public trust in the use of funds.
International practices
U.S. universities collectively held approximately $839.1 billion in endowment assets, according to the National Association of College and University Business Officers Commonfund Study of Endowments, which covers the fiscal year ending June 30, 2023.
Financial reports show that Harvard University ($53.2 billion), Yale University ($40.7 billion), Stanford University ($36.5 billion), Princeton University ($34.1 billion), and MIT ($23.5 billion) had the largest endowments.
Conducted annually since 1974, the NACUBO-Commonfund Study of Endowments is based on data from 688 U.S. colleges and universities.
These funds play a crucial role in shaping university budgets. According to the 2006 Uniform Law Commission, the primary legal framework governing the operation of endowment funds in the U.S. is the Uniform Prudent Management of Institutional Funds Act (UPMIFA).
According to Sayasat Nurbek, the Kazakh government considered international best practices while developing Kazakhstan’s endowment fund legislation. The law draws on UPMIFA of the United States, the Russian law on endowment funds, as well as the experience of Australia, France and Singapore.
The new law paves the way for fostering strong, engaged communities around universities and marks an important step toward the sustainable development of science and higher education in Kazakhstan. But it should be considered that, beyond establishing a solid legal framework, the success of endowment funds will depend on effective, high-quality management aligned with the best international practices.
And if successfully implemented, Kazakhstan’s endowment model could become a benchmark for other countries seeking to build financially resilient and globally competitive universities.
