Institutional spending policies: implications for future asset values and spending

Snorre Lindset and Egil Matsen ()
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Egil Matsen: Norges Bank

Financial Markets and Portfolio Management, 2018, vol. 32, issue 1, No 3, 53-76

Abstract: 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.

Keywords: Endowments; Sovereign wealth funds; Endowment spending policies (search for similar items in EconPapers)
JEL-codes: G11 G23 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s11408-018-0304-9

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