QUESTION #7: HOW DID WE GET SUCH A BIG ENDOWMENT? AND, WHAT IS THE "4.5%" POLICY I'VE HEARD SO MUCH ABOUT? AND, WHY ARE THE TRUSTEES SO COMMITTED TO THIS SPENDING LIMIT POLICY?
The success of Grinnell's endowment growth, shown below, reflects the College's long-term investment success. The 4.5% policy, which provides that we may use up to 4.5% of the twelve-quarter rolling (i.e., moving) average of the endowment's value (but no more), is a limit. Most colleges have a similar policy, which is financially prudent. This policy takes into account the College's changing needs and variations in the health of the economy.
Because of the increasing nominal value of the endowment in recent years, the College has used less than this policy permits for operations. Therefore, somewhat less than 4.5% of the endowment's twelve-quarter rolling average actually has gone into the base budget each year. To learn why, see Question #9.
In 1998, the Trustees created the Fund for Excellence with the available revenue beyond what was used for the base budget. Now this remainder is placed in the Capital Reserve Fund, discussed in greater detail in Question #8.
Year-end endowment market value:
 |
|
| From the Grinnell College Fact Book, 2000-01 (page 23) | |
