Six Key Factors in Spend Rate Decisions

(From TIFF) Adjusting an endowment’s spend rate is a significant decision, balancing current institutional support with long-term financial health. Higher spending boosts short-term funding but reduces future compounding, potentially lowering long-term support. For example, raising a 4% rate to 4.5% may help now but shrink the endowment over time. For better decision-making, consider:

• Timing of value: Spend now vs. more later through compounding.
• Duration: Spend rate changes are not permanent.
• Impact to strategy: May shift return targets, risk and allocation.
• Inflation expectations: Affect returns, budgets and methodology.
• Institutional factors: Funding needs, revenue stability, debt.
• Industry perspective: Peer benchmarks provide context.

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