What condition must be met for spending rates in endowments?

In the context of endowment spending rates, the primary goal is to ensure that the purchasing power of the endowment is preserved over time. By setting a spending rate that is less than the expected rate of return, the endowment can grow and maintain its value after accounting for inflation and expenditures. This approach is crucial because it allows the endowment to continue supporting its intended purposes while safeguarding its capital against inflationary erosion.

In essence, if the spending rate exceeds the expected rate of return, the endowment would risk depleting its capital over time. This could jeopardize its ability to fulfill its long-term commitments and objectives, as the funds available for spending would get reduced year over year. Therefore, maintaining a spending rate that is lower than the expected rate of return ensures sustainability and allows for future growth in both the principal and the funds available for spending.

The other options suggest criteria that would either undermine the endowment's long-term viability or are not typically used as guidelines for determining spending rates. Consequently, the understanding of the relationship between the expected rate of return and spending rates is fundamental in managing endowments effectively.