How is spending determined? What is the relationship between overall investment return and the “spending” on an endowment?
Spending policies are set by the two boards and managed by the Investment Committee. A sustainable spending rule is total net investment return minus inflation. Programmatic endowment spending is generally computed as a percentage of the average market value of the previous three years of the fund as long as adequate reserves are available. The Investment Committee uses this averaging method in order to smooth out changes in market volatility.
