The role of endowments in academic finances of higher education is examined. Two effects of the decline of endowment funding, their failure to keep pace with inflation and loss of income for innovative programs, are cited. The historical role of endowments in institutional finances is reviewed. Present concepts of endowment management are discussed, including the "total return" investment approach and management objectives in the areas of spending policy, portfolio diversification, and endowment growth. The possible effects of ethical issues on endowment funds is illustrated by the South African-related investments. Decisions to divest all South African stocks cause a number of problems for institutions, not only possible loss of revenue due to divestiture costs and lack of sound investment possibilities but also possible loss of potential contributions from business. A current attitude among college and university investors is that their presence in South Africa can contribute to changing current conditions. It is concluded that the decline of endowments' contributions to general institutional revenues is part of the general financial problem in academe, and that current policy seems to dictate a more balanced management approach that would protect endowment principal and seek profit by diversifying the portfolio into several different types of financial markets. (PHR)