Financial Markets and Portfolio Management

, Volume 32, Issue 1, pp 53–76 | Cite as

Institutional spending policies: implications for future asset values and spending

  • Snorre LindsetEmail author
  • Egil Matsen


University endowments, sovereign wealth funds, and foundations support spending. In this paper, we analyze how different spending policies affect future asset values and spending opportunities. We show that the covariance between the asset returns and the spending rate implied by the spending policy is important in this regard. Many of the spending policies used in practice aim at smoothing the spending level by letting current spending be a function of both current asset values and earlier spending levels. One feature of these types of spending policies is that the funds can be depleted. Depleted funds cannot support spending.


Endowments Sovereign wealth funds Endowment spending policies 

JEL Classification

G11 G23 



We acknowledge helpful comments from an anonymous referee and the editor, as well as from Gunnar Bårdsen, John Campbell, Knut Anton Mork, and Svein-Arne Persson. The paper was partially written while Lindset was a visiting research scholar at the University of Central Florida and while Matsen was a visiting research scholar at Harvard University.


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Copyright information

© Swiss Society for Financial Market Research 2018

Authors and Affiliations

  1. 1.Department of EconomicsNorwegian University of Science and TechnologyTrondheimNorway
  2. 2.Norges BankOsloNorway

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