06272023-board-book.pdf — PaddleOCR-VL (Baidu)

III. Financial and Investment Objectives

The following financial and investment objectives have been established for the University Endowment:

To preserve the long-term purchasing power of the Endowment assets and the related annual spending distributions over time to evenly allocate support between current and future beneficiaries (intergenerational equity).
To earn an average annual spending distribution, after expenses, of at least 5.0% per year over full economic market cycles.

Kentucky Uniform Prudent Management of Institutional Funds Act (KRS 273.600 to 273.645)

Endowment assets will be managed by the Board of Regents or its designated Committee in accordance with the provisions of the Kentucky Uniform Prudent Management of Institutional Funds Act (KRS 273.600 to 273.645).

Annual Spending Distribution Policy

A spending distribution policy has been established that is based on a rolling average of market values in order to reduce adverse budgetary impact due to market volatility of the endowment assets. The annual spending distribution will be calculated by a smoothing formula based on a rolling three-year average of the quarterly market values. Ending market values for the last 12 quarters are averaged, and the result is then multiplied by the 4% spending rate (1% per quarter) to determine the total amount to be distributed. This amount is then allocated to participating funds based on their pro-rata share of the total investment pool.

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 3.5% or lowered to 5%. The Board of Regents reserves the right to freeze, lower or increase the annual spending distribution in an extraordinary financial situation.

Management Fee

Eligible Endowment funds will be assessed an annual management fee of 0.50% of the current market value (assessed monthly or quarterly) to support administrative costs.

The Board of Regents may temporarily increase the management fee to support additional expenses associated with Endowment, fundraising, or administrative activities. At no time shall the management fee exceed 1.00% annually.