Institutional spending policies: implications for future asset values and spending

Institutional spending policies: implications for future asset values and spending University endowments, sovereign wealth funds, and foundations support spending. In this paper, we analyze how different spending policies affect future asset values and spending opportunities. We show that the covariance between the asset returns and the spending rate implied by the spending policy is important in this regard. Many of the spending policies used in practice aim at smoothing the spending level by letting current spending be a function of both current asset values and earlier spending levels. One feature of these types of spending policies is that the funds can be depleted. Depleted funds cannot support spending. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Financial Markets and Portfolio Management Springer Journals

Institutional spending policies: implications for future asset values and spending

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Publisher
Springer US
Copyright
Copyright © 2018 by Swiss Society for Financial Market Research
Subject
Business and Management; Business and Management, general; Finance, general; Management
ISSN
1934-4554
eISSN
2373-8529
D.O.I.
10.1007/s11408-018-0304-9
Publisher site
See Article on Publisher Site

Abstract

University endowments, sovereign wealth funds, and foundations support spending. In this paper, we analyze how different spending policies affect future asset values and spending opportunities. We show that the covariance between the asset returns and the spending rate implied by the spending policy is important in this regard. Many of the spending policies used in practice aim at smoothing the spending level by letting current spending be a function of both current asset values and earlier spending levels. One feature of these types of spending policies is that the funds can be depleted. Depleted funds cannot support spending.

Journal

Financial Markets and Portfolio ManagementSpringer Journals

Published: Jan 31, 2018

References

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