What effect does the target distribution (spending) rate have on an endowments value in the long term?
One of the two objectives required to preserve the purchasing power of the endowment is to increase the market value of the endowment (after the annual distribution) at a rate at least equal to the rate of inflation. Over the long term, a higher spending rate will produce a lower long term endowment market value when compared to a lower spending rate. The effect that the distribution (spending) rate will have on the endowments value is shown graphically in Figure D.
