A New Endowment Distribution Plan

Abstract

The management of an endowment fund poses unique investment challenges. Obviously there is the choice concerning the allocation of the endowment corpus between riskier investments with higher returns and virtually risk free investments. There is also a need to provide stability in the amounts distributed for spending to further the purposes of the endowment. The authors show one way to achieve these objectives is to split the fund principal between essentially risk-free commercial annuities for a selected fixed term and a diversified stock portfolio. This will allow the fund to guarantee fixed expenditures for current needs and provide an excellent opportunity to grow the fund.