The Foundation maintains a commitment to a total return investment philosophy, including a 5.5% spending limit, to ensure the ongoing viability of funds. Any investment return earned over the spending limit is added to principal, thus combating inflation, overcoming down markets, and even growing endowments, all for the benefit of grantees.
 
A spending rule study took a representative stock portfolio over a 44-year period, and showed that, with a 5.5 percent spending cap, an endowment would have grown in real value by 25%, and would have spent nearly seven and a half times the original gift. With a 6.5 percent spending rate – only one percent more – during the same period, the real value would have dropped 18.8 percent, and the beneficiary would have received fewer dollars in grants. At 7.5 percent and higher spending levels, the difference becomes a chasm.
 
Admittedly, with a spending rule the beneficiary receives less in the early years of an endowment. But because Foundation endowments are all about long-term — in fact, perpetual — charitable support, the value of limiting spending now is to provide continuing support at rising levels in the future.
 
For more information about the Foundation's use of a spending rule, request our Winter 95-96 newsletter that explains it, and endowments in general, in full.