prior year's December 31 value. The amount is then allocated to participating funds based on their pro-rata share of the total investment pool.
Donors may opt out of the standard investment policies (outlined under “Investment Policies”) and the spending distribution policy in writing and upon the Board’s acceptance of such opt-out request.
Note: the calculated annual spending distribution rate must fall between 3.5% and 5% of the current market value of the Endowment. Should the rolling three-year average be outside the range, it will be raised to the equivalent of 3.5% or lowered to the equivalent of 5%. The Board of Regents reserves the right to freeze, lower, or increase the annual spending distribution in an extraordinary financial situation.
Eligible Endowment funds will be assessed an annual management fee of no more than 1.00% (100 basis points) of the current market value to support administrative costs by the institution. Inclusive of all services, at no time shall more than 50% of the annual management fee go towards the Consultant or investment services.
The target annual spending distribution rate and management fee represent maximum amounts that can be withdrawn annually from individual Endowment funds. The administration, at their discretion, may reduce or suspend withdrawals from individual Endowment funds that are underwater. The administration will define underwater Endowment funds annually, and will advise the Consultant of the implementation or removal of reduced or suspended withdrawals from individual Endowment funds.
Spending distributions and management fee withdrawals will be suspended on all Endowment funds underwater by more than 20%. Endowment funds that are underwater more than 10% will undergo a formal review by the Office of the Controller and appropriate staff members to determine the appropriate level of spending distributions in accordance with the following factors set forth in the Kentucky Uniform Prudent Management of Institutional Funds Act:
The duration and preservation of the Endowment fund;
The purposes of the Institution and Endowment fund;
General economic conditions;
The possible effect of inflation or deflation;
The expected total return from income and the appreciation of investments;
Other resources of the institution; and
The investment policy of the Institution
Spending distributions on new Endowment funds will be delayed for at least one (1) year in order to build a reserve for future spending distributions. The administration may modify this requirement depending on partial-year returns.