Also, it seems odd that if the funds are restricted to be used for a specific purpose that they university is allowed to gamble those funds in the market. Something about this doesn't add up.
It would depend on the facts of the gift; but my understand is that if you give money to be used for a specific purpose, it is restricted to be used for that purpose.
There are also gifts that do not allow the principal to be spent; only returns on it. The gift is given in the expectation that it will be invested.
Your use of "gambled in the market" is quite loaded; I don't think that most people would regard the activities of these investment officers that way.
I recall my university's chief investment officer announcing that the university could tolerate riskier investments after the endowment topped $4bn. She promptly lost nearly $800m.