The typical endowment or foundation bases its long-term return objective on its long-term spending rate plus inflation. It then designs its strategic asset allocation based on that return objective, assuming it has the risk tolerance to do so. When looking at historical returns, there is endpoint sensitivity to the values, but there is also starting-point sensitivity in capital market expectations. By integrating the endpoint sensitive historical returns with starting-point sensitive capital market expectations, we can reduce the impact of the chosen starting date of the analysis while still accounting for current market conditions.

This research paper demonstrates the:

  • Expected 10 year returns from December 31, 2009 and contrasts them with returns 10 years later
  • Extent to which forward-looking returns changed from December 31, 2019 to March 31, 2020; and then from March to June 30, 2020.
  • Likelihood of achieving objectives based on future expectations or inclusive of historical returns and future expectations

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