The number of colleges and universities facing financial difficulty is rising rapidly, and the pressures upon these institutions will be exacerbated by the arrival of the "demographic cliff " (18 years out from the fall in birth rates during the 2008/09 economic downturn) in 2026/27. The Forbes annual financial ranking of academic…

Recently, spending and fees at colleges and universities have been rising faster than family incomes. If this trend persists, increasing emphasis will be placed on endowments as a source of finance. This paper examines financial planning when growth rates for the sources and uses of funds differ. First, we examine concepts of "intergenerational…

In this article we analyze the dynamics of endowment spending and real endowment values using rules that tie endowment spending to inflation. Numerical examples demonstrate that under a pure inflation rule, spending rates tend to drift away over time from the appropriate rate, leading to either rising or falling real endowment values. Under a…

Analyzes ways in which asset allocation, investment guidelines and objectives, and investment performance may create indirect income redistribution among institutional constituents, including redistribution from future to present constituents. Comments on the implications of inflation and deflation for these aspects of endowment fund management.…

Illustrates how nonendowment cash flows (tuition, grants, and gifts) affect the portfolio allocation decisions for the endowment and are "efficient" in terms of the total wealth of the institution. A mathematical appendix displays the reasoning behind the model. (Contains 12 references and 4 tables.) (Author/MLF)