Critical Factor for Endowment's Financial Health

Very Easy Institutional Portfolio Mgmt Foundations And Endowments

A university endowment fund aims to provide financial support for scholarships, faculty research, and infrastructural improvements. The fund's investment policy emphasizes a long-term growth strategy while managing risk. Recently, the board has expressed concerns about the sustainability of the fund's spending rate in light of recent market volatility.

Given this context, which factor is most critical for the endowment's long-term financial health?

Maintaining a high cash allocation to ensure liquidity.

Establishing a sustainable spending rate that aligns with the endowment's investment return.

Investing primarily in high-risk, high-return assets.

Hint

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% Correct89%