Investment Objectives

Our Objectives

The objectives of Legacy Endowment…the Community Foundation have been established in conjunction with a comprehensive review of the current and projected financial requirements.  The objectives are:

  1. Maintain a constant funding support ratio

The desire of the Committee is to grow the Foundation’s invested assets, in accordance with UPMIFA, in order to maintain the level of programs and services currently provided.  This objective can only be met if sufficient total return is reinvested and sufficient new funds added keep pace with cost increases and program expansions.

2. Maintain the purchasing power of the Fund

The objective is to maintain the level of services and programs in relation to average cost increases.  This requires establishing an annual spending target of 5.5% (average of 4.5% for programs and 1% for administrative costs) and a target return rate of 7.5% (average of 4.5% for programs, 1% for administrative costs, and 2% estimated core annual inflation), at a minimum.

3. Follow a spending policy based on portfolio performance

A portfolio performance based policy allows the committee to (a) map out a long-term investment strategy, and (b) employ modern investment management techniques.

4. Apply a smoothing practice to mitigate the effects of short-term market volatility on spending

Since investment returns may vary dramatically from year to year, spending a constant percent of the Foundation’s market value could cause instability with fund distributions.  Therefore, the following smoothing practice will be applied:

Moving Average The annual spending rate will be determined by considering the average of the past three years (previous 12 quarters) of the Foundation’s endowment funds’ market values, in conjunction with a snapshot of the fiscal year-end audited financial statements