Which of the following is NOT one of the spending rules for endowments?

The correct answer is related to the specific characteristics that differentiate spending rules for endowments, which aim to manage the withdrawals from the fund in a manner that balances current spending needs with the goal of preserving the fund's value over time.

The compound annual growth option does not function as a recognized spending rule for endowments. Endowment spending rules are typically designed to determine a fixed or flexible amount that can be distributed based on the fund's performance, historical spending levels, or market conditions, whereas a compound annual growth rate (CAGR) measures growth over a specific period without establishing a spending mechanism for distributions. Thus, using a CAGR does not align with the operational needs of endowment spending strategies.

In contrast, simple, geometric smoothing, and rolling 3-year spending rules are recognized methodologies utilized by endowments to facilitate withdrawals in a sustainable manner. These strategies often involve averaging past performances or smoothing out fluctuations to mitigate the volatility of investment returns and ensure that spending remains relatively stable year over year.