Liquidity for Pensions and Endowments

Is there a rule of thumb for this? I have seen answers that specify that the return requirement is equal to one years spending requirment and others that designate the liquidity needs as minimal. What are your thoughts?

Sorry meant Foundations and Endowments

Foundations have a minimum spending requirement of 5% + mgmt fees. This can be either a smoothing value from the last 3 years, geometric, or the value of the foundation from last year.

Endowments have no spending requirements.

The question is about liquidity requirements. In some examples, it will state something like: 1. The liquidity needs of the endowment are minimal, given that the spending requirements are spread out over the year. Cash allocations should be a minimal. 2. The liqudity needs of the endowment are approximately $2,000,000, or the 5% annual spending requirement.

I know what is going to kill me come Saturday. lol

It seems as though CFAI is somewhat consistent with saying that liquidity needs are low. In the EOCs for this section (Volume 2, reading 20, pg. 444) they keep coming back to this fact. It is always explained that the current income and capital appreciation gained throughout the year are sufficient to keep up with most spending requirements, and that no cash on hand is generally needed. I think what they are getting at is the perpetual nature of endowments and foundations. The goal is generally to continue to fund charitable causes into perpetuity, and to do so, all assets would need to be invested. An allocation with a certain amount of current income would be wise, as well as a decent allocation to " readily marketable securities." answer from EOC reading 20 #7,3: “Endowments typically have low liquidity needs, except to fund periodic distributions and to cover emergency needs. Distributions are usually foreseeable and can usually be met from a combination of investment income and the sale of readily marketable securities.”