- Achieve a particular level of income so as to fulfill a certain proportion of a university’s budget. The income requirement cannot be too volatile. If the university do not have this proportion of income, their operations would be affected.
- Preserve the purchasing power of the endowment. The endowment needs to cater for future budgetary needds. Income requirements will go up over time due to inflation. The endowment would need to grow in value so as to preserve the purchasing power. This means the endowment need to grow at a particular rate of return.
The endowment of universities is an area that I took an interest in the past because they have very specific requirements that are similar to what many look for in their wealth. (You can read could we model our retirement spending like endowment funds?)
University endowments sought to address two conflicting goals: