What return objective should a foundation maintain?

The appropriate return objective for a foundation is to preserve the real value of its investments while accommodating spending needs. This approach balances the foundation's desire to maintain its capital over the long term with the necessity of withdrawing funds for operational and grant-making purposes.

Foundations typically operate with the goal of supporting charitable activities over an extended horizon, meaning they must ensure that the purchasing power of their endowment does not erode due to inflation. Therefore, preserving the real value of investments is essential — it ensures that the foundation can continue to support its mission in the future without diminishing its asset base.

Additionally, accommodating spending aligns with the foundation's operational needs, as it must ensure that there are sufficient resources available for distributions. This balance between growth and spending is a fundamental principle in foundation management and ensures sustainability.

In contrast, options focusing on short-term profits or avoiding losses do not adequately address the long-term mission or inflation impacts, while significant spending that exceeds investment growth would lead to the depletion of resources over time, compromising the foundation's ability to fulfill its long-term commitments.