Why is it the Endowments sometimes have higher risk tolerance than Foundations given constraints are similiar (TTLLU)? Kaplan seems to jumble these two together so I never really considered one to be different from the other. Is this method of thinking wrong then?
Foundations usually have a minimum payout which they must distribute every year to remain tax exempt under UMIFA regulation. CFAI mentions 5% several times. Endowments on the other hand do NOT have this requirement. If the institution they are supporting on operational basis has a budgetary surplus, they could elect to forego making any distributions for said year.
Where did you find this different risk tolerance assumption? In CFAI material?
Ahhh…I see.
Yeah I’ve noticed some subtle differnces here and there between CFAI and Kaplan. Although minor but something like this could potentially trip people up. Not sure why Kaplan elects to forgo these smaller details because it was never explicitly mentioned anywherein their material.
I believe I saw this on one of the mocks from CFA Ninja.