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ENDOWMENT SPENDING POLICY

ENDOWMENT SPENDING POLICY. Effective for FY 2014-15. Investment Policy.

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ENDOWMENT SPENDING POLICY

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  1. ENDOWMENT SPENDING POLICY Effective for FY 2014-15

  2. Investment Policy • Board of Trustees Investment Committee approved significant changes to the Endowment Investment Policy on December 10, 2012. Other changes have been made to the investment policy since that time, but the section regarding spending has not changed. • Investment Policy located on the Endowment Services website at http://www.uky.edu/EVPFA/Controller/files/endow/POLICY.pdf

  3. Spending Policy • Implementation of Spending Policy • FY 2013-14 has served as a transition year with spending based on 4% of the trailing 60 month endowment market value. • Hybrid policy will be fully implemented in FY 2014-15.

  4. Spending Policy • 60/40 hybrid spending policy • 60% based on prior year spending +/- the annual change in inflation • 40% based on 4.0% of the trailing 36 month average endowment market value • Calculated spending rate must fall within 3.0% to 6.0% of the current endowment market value.

  5. Benefits of Hybrid Policy • Better smoothing of spending distributions to campus • Directly linked to inflation, which is one of the spending criteria set forth by the Uniform Prudent Management of Institutional Funds Act (“UPMIFA”)

  6. Underwater Endowments • Endowments >20% underwater • Spending distributions and management fee withdrawals will be suspended. • Endowments >10% & <20% underwater • Office of the Treasurer will review with each College Dean to determine appropriate level of spending based on the spending criteria set forth by UPMIFA.

  7. UPMIFA Spending Criteria • The following factors must be considered when making endowment spending decisions: • the duration and preservation of the endowment fund; • the purposes of the institution and the endowment fund; • general economic conditions; • the possible effect of inflation or deflation; • the expected total return from income and the appreciation of investments; • other resources of the institution; • the investment policy of the institution.

  8. New Endowment Funds • Spending distributions are delayed on new endowment funds for at least one year in order to build a spending reserve. • Implemented in FY13-14

  9. Questions? • Feel free to contact any of the following individuals if you have questions on the spending policy • Donna Counts • Kim Lush

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