Is the major difference the fact that endowments are perpetual but foundations have a limited time horizon?
foundations have a minimum spending limit whereas endowments don’t. schweser provides a few charts on the differences - i suggest you search for those.
and because of this potential variation in spending with endowment, sometimes endowments enforce some soothing mechanisms to decide on the spending. eg. using 3 years as the window for smoothing. - sticky strikershank Wrote: ------------------------------------------------------- > foundations have a minimum spending limit whereas > endowments don’t. > > schweser provides a few charts on the differences > - i suggest you search for those.
Core differences between the 2 (according to Schweser): Endowments : - Are ALWAYS designed to exist in perpetuity - Have No minimum payout rate.
Can we treat it the same from exam purpose?
Both should have spending rule?
I guess the diffenet not the time horizon. Both can be infinite. the distinct differences is endowment is created for the purpose to serve its sponser whereas foundation is not, it depends on the type of the foundation. remember the risk tolerance of the endowment will affected downward if the sponser operating budget rely heavily on the endomwnt spending.
Foundations are typically grant-making institutions funded by gifts and investment assets. Endowments, on the other hand, are long-term funds generally owned by operating non-profit institutions such as universities and colleges, museums, hospitals, and other organizations involved in charitable activities.
From RRTTLLU perspective, should have no difference?
TIme horizon: foundation typically shorter.
Foundations do not aim to exist in perpetuity and may intend to spend down the principal over a predefined period of time. As a result, as time passes, their time horizon shortens, resulting in decrease in risk tolerance over time.
Liquiditiy: Foundation liquidity needs is higher given only foundation has 5% (usually) min spending rule.