is spending rule the return requirement for endowments?

CFA Level III
#1

title

thank you

#2

(1+ spending )* (1+ management fees) *(1+ inflation)-1

#3

Yes, janakisri has it correct. Geometric average the spending, inflation and expenses.

#4

liquidity will be only (1+ spending )* (1+ management fees) -1

#5

right - but he asked about return requirement. Must include inflation.

Management fees were noted as an alternative answer in the previous AM exams (for liquidity). I was surprised because it technically is a necessity. Either way I’d include it - consider you correct.

#6

I know so far that

Anticipated (required min spending rate) or Unanticipated liquidity requirements

Minimum spending requirement (payout rate) includes salaries of program officers and exec; but does not include investment mgnt fees??

#7

req’d return is spending rule +fees. either using geometric or arithmetic method.

There is a question on the June 2009 paper on this.

#8

for institutional -> mostly geometric method

#9

one year or less use additive

over one year use geometric