TCU: Investment Management


Endowment Payout


The goal of a spending rule is to balance two conflicting objectives: releasing a substantial, stable flow of resources to the University’s operating budget while also preserving the real or purchasing power adjusted value of Endowment assets for future generations. The University adopts the goal of a spending rate approximating 5% of market value over the long term. This is combined with a smoothing rule that gradually adjusts spending to reflect changes in Endowment market value and avoids large fluctuations in flows released from the Endowment.


Spending is therefore based upon 5% of the trailing 12-quarter average Endowment market value as of December 31 of a particular year. However, the prior year’s spending is considered as the floor in determining a given year’s spending value. The spending in any given year would not be less than the prior year’s Endowment spending amount. The Spending Policy will be reviewed annually, and spending may be adjusted after consideration of the estimated cumulative differences between the calculated natural payout and any floor that might be established.


TCU Endowment Spending Rate by Fiscal Year


As a Percentage of Year-End Market Values


endowment payout


In Fiscal 2008, TCU reached its goal of spending only 5% of the average market value of the endowment. This spending rate was maintained in Fiscal 2009, however planned spending increased slightly in Fiscal 2010 and will again in Fiscal 2011 due to recent market volatility. It is anticipated that for future years the spending rate will remain at or near the five percent level. Studies have shown that five percent is considered to be the optimum sustainable payout rate to secure long-term value and is a common payout rate for university endowments of TCU’s size.