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 around 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:

  • Return experience over the past decade
  • Understanding return expectations through time
  • Integrating historical returns with forward-looking expectations in objective settings

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