Spending Policies, Asset Allocation, and Investment Performance of University Endowments


Keith C. Brown

Cristian Tiu



October 2014





For more than 800 college and university endowment funds over 2003-2013, we provide a comprehensive analysis of the spending policies used in practice as well as how frequently and why those mandates are revised over time. We find that half of the endowments revised their rules at least once and, on average, about a quarter of the sample changed their spending policies each year, implying a retention rate far lower than expected. We show that larger endowments with lower historical portfolio returns and lower past payout levels are more likely to alter their future spending formulas, but that institutions having the ability to invoke special appropriations on a temporary basis are less likely to make adjustments to their permanent rules. Further, we document that both spending rule changes and asset allocation adjustments persist over time and that the former tends to lead the latter. Finally, we show that there is no difference in benchmark-adjusted performance between institutions that either did or did not change their spending rules.


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