Investment Strategies for a Foundation Endowment Fund

XYZ Endowment Fund is a large institutional investor that focuses on providing financial support for various educational initiatives worldwide. The fund has an investment policy aimed at balancing the growth of its assets while generating income for ongoing operations. With the current market volatility and rising inflation rates, the endowment faces challenges in maintaining its spending policy of distributing 5% of its average market value over the prior three years.

As an investment consultant, describe the specific investment strategies you would recommend for the XYZ Endowment Fund to ensure it meets its financial goals while remaining aligned with its mission. Please discuss the considerations of risk tolerance, liquidity needs, and the strategic asset allocation that would be appropriate for this endowment.