Regent Policy Documents
SECTION 31: TRUST AND INVESTMENT POLICIES
31-8 SMALL FRACTION SPENDING PLAN (ENDOWMENT REINVESTMENT)
(Formerly 90-4)
Effective with the 1991-92 fiscal year, a Small Fraction Spending Plan (Endowment Reinvestment) is implemented for Trust Funds. The plan will be phased in over two years; a 5.5% spending fraction in the first year; 5.2% the second year and then 5.0%*. The fraction will be applied to a three-year moving average of endowment valuations (12 quarterly valuations). Capital gains may be used to maintain the spending rate when income earned is less than the fraction. Income earned in excess of the fraction will be added to endowment principal in a Stabilization Reserve. The formula for determining the quarterly amount for the Stabilization Reserve is:
Total Principal Earnings--Consolidated University Trust Funds
Less: Investment Advisory and Administrative Fees on Principal Funds
Less: Small Fraction amount
Equals Addition to the Stabilization Reserve
Departments, with approval of the chancellor's delegate, may withdraw funds from the Stabilization Reserve for special circumstances upon a minimum 30 days advance notice. In years when income earned is less than the fraction, a portion of the Stabilization Reserve (net remaining balance for each amount) or capital gains will be used to maintain the spending rate. The spending fraction and asset allocation ratio will be periodically reviewed with any changes to the spending fraction being acted on at the September Regent meeting. Individual accounts that mandate usage of the annual income will be excluded from the plan.
*The fraction is reduced to 4.0% by Res. 9030, 06/05.
History: Res. 5555 adopted 7/13/90, amended by Res. 6390, 5/93; amended by Business; Finance Committee, 10/6/95; amended by Res.8324, 3/01, amended by Res. 8640, 12/02; amended by Res. 9030, 06/10/05.
The Regent Policy Documents were adopted and are maintained pursuant to the policy-making authority vested in the Board of Regents by Wis. Stats. § 36. The Regent Policy Documents manifest significant policies approved by the University of Wisconsin System Board of Regents. This document is a ready reference for those charged with carrying out these policies. Unless noted otherwise, associated documents and reports may be obtained from the Office of the Secretary of the Board of Regents, 1860 Van Hise Hall, 1220 Linden Drive, Madison, WI 53706, ph 608-262-2324. http://www.uwsa.edu/bor/policies/