What are the typical return objectives for endowments?

Endowments primarily aim to achieve high return objectives while preserving purchasing power after inflation. This strategy is essential because endowments typically have long-term investment horizons and are tasked with generating sufficient returns to support their beneficiaries over extended periods, all while ensuring that the real value of the assets is maintained.

By focusing on high returns, endowments can provide the necessary funding for their institutions, like universities or charities, supporting ongoing programs and initiatives. Additionally, preserving purchasing power is crucial to combat the erosive effects of inflation over time, ensuring that the spending power of the endowment remains intact for future generations.

This approach balances the need for growth with an awareness of risk, as endowments often invest in a diversified portfolio that might include equities, bonds, real estate, and other asset classes, each contributing differently to the overall return and risk profile.

The choice to emphasize high returns in this context reflects a long-term investment philosophy that is appropriate for the perpetual nature of endowments, distinguishing them from other entities that may prioritize immediate income or capital preservation.