If an endowment’s spending rate is pegged to its market value the year before, and the beneficiary is requesting an increasing amount of annual aid, does that change the time horizon of the endowment at all? Or would it still be long term given it’s a going concern?
Wouldn’t it just increase return objective and maybe liquidity. Unless the endowment winds down somehow I don’t see how it would affect it.
Wouldn’t an increase in short term liquidity affect time horizon?
no… it is meant to exist into perpetuity
Time horizon is still perpetual, but I’d guess that return requirement becomes higher. Or it may be the case than the beneficiary is demending too much and it could jeopardize preserving real value of assets. In such case, some kind of concessions should be made.
uhh… time horizon mean changes/stages investment return objectives. If it’s a temporary for 5 years then you would, but if it’s a change of the overall return then that’s just in the return objective and maybe liquidity needs since they might need to put down more money for beneficary operations.
beneficiary is requesting an increasing amount of annual aid < - this would increase liquidity needs which in return would mean that a it should aim for higher return objective but this might introduce high amount of risk if there are no contributions.