Preserving the Purchasing Power

The Community Foundation’s investment and spending philosophy are designed to preserve the purchasing power of the endowment over time even after making charitable distributions to the community. The spending rate in 2009-2010, as it has been since 2007, was 5.75% for The Community Foundation’s corporate assets and 5.25% for our Bank of America and Wells Fargo trust assets.

In order to preserve the purchasing power and real economic spending of the endowment, The Community Foundation’s Corporation, which includes those funds held by The Community Foundation’s affiliate The Valley Community Foundation, manages its assets in accordance with a total-return approach.

This approach does not distinguish between an asset’s yield and appreciation, but rather on the total expected return of the assets over the long-term. The Foundation will withdraw a specific percentage of the market value from the endowment in accordance with a Spending Rule Policy, which is designed to prudently release a predictable stream of revenue during each fiscal year to meet the region’s charitable needs, while at the same time allowing for maximum flexibility and efficiency of the investment management process.

In order to achieve the spending requirements and maintain the endowment’s purchasing power, The Corporation operates in accordance with The Spending Rule Policy and The Asset Allocation Policy (right).

Generally, the process for extracting financial resources from endowment funds to meet the charitable needs of our community is accomplished through a Spending Rule Policy, which is defined as follows:  A Spending Rate, which is determined annually by The Corporaton's Board of Directors, equal to the greater of: a) Fixed percentage (5.75% in 2010)  of the endowment assets available for investment based on a trailing five-year moving average; or b) Four and One-Quarter Percent (4.25%) (the “Floor”) of the market valuation of the endowment assets at the end of the most recent calendar quarter; provided however in no event shall the Foundation spend more than Five and Three-Quarters Percent (5.75%) (the “Cap”) of the market valuation of the endowment at the end of the most recent calendar quarter.